Eledctroencephalography (EEG) has excellent temporal resolution, but the spatial resolution is poor. Different source localization methods exist to solve the so-called inverse problem, thus increasing the accuracy of spatial localization. This paper provides an overview of the history of source localization and the main categories of techniques are discussed. LORETA (low resolution electromagnetic tomography) is introduced in details: technical informations are discussed and localization properties of LORETA method are compared to other inverse solutions. Validation of the method with different imaging techniques is also discussed. This paper reviews several publications using LORETA both in healthy persons and persons with different neurological and psychiatric diseases. Finally future possible applications are discussed.