Olive oil, an oil rich in monounsaturated fatty acids (MUFCs) and minor constituents including phenolic compounds, is a major component of the Mediterranean diet. The potential health benefits of the Mediterranean diet were highlighted by the seminal Seven Countries Study, and more contemporary research has identified olive oil as a major element responsible for these effects. It is emerging that the phenolic compounds are the most likely candidates accounting for the cardioprotective and cancer preventative effects of extra virgin olive oil (EVOO). In particular, the phenolic compound, hydroxytyrosol has been identified as one of the most potent antioxidants found in olive oil. This review will briefly consider historical aspects of olive oil research and the biological properties of phenolic compounds in olive oil will be discussed. The focus of the discussion will be related to the mechanisms of action of hydroxytyrosol. Studies have demonstrated that hydroxytyrosol induces apoptosis and cell cycle arrest in cancer cells. Further, research has shown that hydroxytyrosol can prevent cardiovascular disease by reducing the expression of adhesion molecules on endothelial cells and preventing the oxidation of low-density lipoprotein (LDL). The molecular mechanisms accounting for these effects are reviewed.