The ATP binding cassette (ABC) superfamily of membrane transporters is one of the largest protein classes known, and counts numerous proteins involved in the trafficking of biological molecules across cell membranes. The first known human ABC transporter was P-glycoprotein (P-gp), which confers multidrug resistance (MDR) to anticancer drugs. In recent years, we have obtained an increased understanding of the mechanism of action of P-gp as its ATPase activity, substrate specificity and pharmacokinetic interactions have been investigated. This review focuses on the functional characterization of P-gp, as well as other ABC transporters involved in MDR: the family of multidrug-resistance-associated proteins (MRP1-7), and the recently discovered ABC half-transporter MXR (also known as BCRP, ABCP and ABCG2). We describe recent progress in the analysis of protein structure-function relationships, and consider the conceptual problem of defining and identifying substrates and inhibitors of MDR. An in-depth discussion follows of how coupling of nucleotide hydrolysis to substrate transport takes place, and we propose a scheme for the mechanism of P-gp function. Finally, the clinical correlations, both for reversal of MDR in cancer and for drug delivery, are discussed.