A thermoelectric effect is a physical phenomenon consisting of the direct conversion of heat into electrical energy (Seebeck effect) or inversely from electrical current into heat (Peltier effect) without moving mechanical parts. The low efficiency of thermoelectric devices has limited their applications to certain areas, such as refrigeration, heat recovery, power generation and renewable energy. However, for specific applications like space probes, laboratory equipment and medical applications, where cost and efficiency are not as important as availability, reliability and predictability, thermoelectricity offers noteworthy potential. The challenge of making thermoelectricity a future leader in waste heat recovery and renewable energy is intensified by the integration of nanotechnology. In this review, state-of-the-art thermoelectric generators, applications and recent progress are reported. Fundamental knowledge of the thermoelectric effect, basic laws, and parameters affecting the efficiency of conventional and new thermoelectric materials are discussed. The applications of thermoelectricity are grouped into three main domains. The first group deals with the use of heat emitted from a radioisotope to supply electricity to various devices. In this group, space exploration was the only application for which thermoelectricity was successful. In the second group, a natural heat source could prove useful for producing electricity, but as thermoelectricity is still at an initial phase because of low conversion efficiency, applications are still at laboratory level. The third group is progressing at a high speed, mainly because the investigations are funded by governments and/or car manufacturers, with the final aim of reducing vehicle fuel consumption and ultimately mitigating the effect of greenhouse gas emissions.