As digital imaging and computing power increasingly develop, so too does the potential to use these technologies in ophthalmology. Image processing, analysis and computer vision techniques are increasing in prominence in all fields of medical science, and are especially pertinent to modern ophthalmology, as it is heavily dependent on visually oriented signs. The retinal microvasculature is unique in that it is the only part of the human circulation that can be directly visualised non-invasively in vivo, readily photographed and subject to digital image analysis. Exciting developments in image processing relevant to ophthalmology over the past 15 years includes the progress being made towards developing automated diagnostic systems for conditions, such as diabetic retinopathy, age-related macular degeneration and retinopathy of prematurity. These diagnostic systems offer the potential to be used in large-scale screening programs, with the potential for significant resource savings, as well as being free from observer bias and fatigue. In addition, quantitative measurements of retinal vascular topography using digital image analysis from retinal photography have been used as research tools to better understand the relationship between the retinal microvasculature and cardiovascular disease. Furthermore, advances in electronic media transmission increase the relevance of using image processing in 'teleophthalmology' as an aid in clinical decision-making, with particular relevance to large rural-based communities. In this review, we outline the principles upon which retinal digital image analysis is based. We discuss current techniques used to automatically detect landmark features of the fundus, such as the optic disc, fovea and blood vessels. We review the use of image analysis in the automated diagnosis of pathology (with particular reference to diabetic retinopathy). We also review its role in defining and performing quantitative measurements of vascular topography, how these entities are based on 'optimisation' principles and how they have helped to describe the relationship between systemic cardiovascular disease and retinal vascular changes. We also review the potential future use of fundal image analysis in telemedicine.