Achieving functional specificity while minimizing cost to fitness is a key constraint during evolution. Formation of biological condensates by liquid-liquid phase separation (LLPS) appears to serve as an important regulatory mechanism to generate moderate specificity in molecular recognition while maintaining a reasonable cost for fitness in terms of design complexity. Formation of biological condensates serves as a unique mechanism of molecular recognition achieving some level of specificity without a huge cost to fitness. Rapid formation of biological condensates in vivo induced by specific cellular or environmental triggers has been shown to be an important mechanism for increasing cellular fitness. Here we discuss the functions and regulation of biological condensates, especially those formed by LLPS, involving interactions between proteins and nucleic acids. These condensates are spatially isolated within the cytosol or nucleus and can facilitate specific biochemical functions under conditions such as stress. The misregulation of biological condensates resulting in nondynamic aggregates has been implicated in a number of diseases. Understanding the functional importance of biological condensates and their regulation opens doors for development of therapies targeting dysfunctional biological condensates, as well as spatiotemporal engineering of functions in cells.