Functionally Graded Materials (FGMs) are a class of engineered materials characterized by a spatial variation of composition and microstructure aiming at controlling corresponding functional (i.e. mechanical, thermal, electrical, etc.) properties. The tailored gradual variation of microstructural features may be obtained through non-uniform distributions of the reinforcement phase(s) with different properties, sizes and shapes, as well as by interchanging the role of reinforcement and matrix materials in a continuous manner. Wide ranges of processing methods are considered on the production of FGMs. Each processing method has its own characteristics on the gradation phenomena which implies on the product. Processing parameters and their influences are presented with consideration of experimental investigations carried out earlier in this field. Also the processing steps to attain the desired gradation with limitations are discussed. Microstructural evaluation, wear mechanisms, porosity, stress distributions, etc. of various metal-metal, metal-ceramic and ceramic-ceramic FGMs are discussed to expose an overall view for carrying future research. Finally the applications of FGMs in various fields, which are still facing new innovations are considered. Improving the performance of processing techniques and extensive studies on material characterization on components produced will go a long way in bringing down the manufacturing cost of FGM and increase productivity in this regard.