Nanofluids belong to a new class of fluids with enhanced thermophysical properties and heat transfer performance. A broad spectrum of applications in science and engineering could potentially benefit from them. The potential market for nanofluids in heat transfer applications is estimated to be over 2 billion dollars per year, and likely to grow even further in the next few years. The available literature on nanofluids will be thoroughly reviewed in this article. Starting from their definition, and their scientific and engineering significance, the discussion will then turn to the literature. A review of the most noteworthy and recent experiments in thermal conductivity, viscosity, heat convection and specific heat will be mentioned, together with various speculations on the meaning of the results. A comprehensive list of empirical models available in the literature based on these speculations will be discussed next. To complete the literature review, numerical studies on nanofluids will also be discussed. The paper will close with a closer look at the various challenges of nanofluids, both in their production and their application. The vast majority of the experiments in the literature shows enhancement in the thermal conductivity, viscosity, and heat convection of nanofluids. However, the enhancements do not seem to follow classical effective medium theories, and an explanation for this anomalous behavior of nanofluids is still largely unknown.