This article presents a review of recent progress in the field of targeted homologous recombination in mammalian cells. Beginning with an introduction of basic terminology and why 'gene targeting' is potentially such a powerful genetic tool, the article explores some of the obstacles that must be overcome in order for targeting to be generally useful. In particular, the different ways in which investigators have been able to work around the great inefficiency of gene targeting is covered in some detail. When possible, insights into the mechanisms(s) of gene targeting are extracted from the published literature. The use of targeted gene 'knockout' in mouse embryonic stems cells to create animal disease models is discussed. The need for systematic studies into the mechanisms(s) of targeting to make gene targeting useful for human gene therapy is recognized, and some suggestions are made.