The anthracycline antibiotic doxorubicin has wide activity against a number of human neoplasms and is used extensively both as a single agent and in combination regimens. In addition to the use of free, unencapsulated doxorubicin, there are two US Food and Drug Administration approved liposomal formulations of doxorubicin currently available, with several additional liposomal formulations being researched either in the laboratory or in clinical trials. The two approved liposomal formulations of doxorubicin have significantly different lipid compositions and loading techniques, which lead to both unique pharmacokinetic and toxicity profiles, distinct from those of the unencapsulated form. This article discusses the toxicities associated with the free form of doxorubicin, as well as those associated with the two most common liposomal formulations, namely Doxil and Myocet. One of the key toxicity issues linked to the use of free doxorubicin is that of both an acute and a chronic form of cardiomyopathy. This is circumvented by the use of liposomal formulations, as these systems tend to sequester the drug away from organs such as the heart, with greater accumulation in liver, spleen and tumours. However, as will be discussed, the liposomal formulations of doxorubicin are not without their own related toxicities, and, in the case of Doxil, may be associated with the unique toxicity of palmar-plantar erythrodysaesthesia. Overall, the use of liposomal doxorubicin allows for a greater lifetime cumulative dose of doxorubicin to be administered, however acute maximal tolerated doses differ significantly, with that of Myocet being essentially equivalent to free doxorubicin, while higher doses of Doxil may be safely administered. This review highlights the differences in both toxicity and pharmacokinetic properties between free doxorubicin and the different liposomal formulations, as have been determined in pre-clinical and clinical testing against a number of different human neoplasms. The need for further testing of the liposomal formulations prior to the replacement of free doxorubicin with liposomal doxorubicin in any established combination therapy regimens, as well as in combination with the newer therapeutics such as monoclonal antibodies is also discussed.