In today's world striving for efficiency in every sector, especially power generation and distribution, smart grids emerge as the solution for efficiently meeting the increasing demand. They adjust themselves to optimally deliver energy at the lowest cost and highest quality possible. The grid successfully makes use of renewable energy resources, electric vehicles, and smart pricing techniques in its attempt to achieve energy efficiency. It also promotes a greener environment by striving to reduce greenhouse gas emissions. Information communication technology (ICT) helps the grid in collecting consumption data from the consumers and in sharing tariff information. ICT also helps to gather information about the status of the grid with regard to aspects like power quality, faults etc. The purpose of this paper is to review recent literature with a view to comprehensively present the technologies employed in the smart grid for achieving energy efficiency and the challenges involved therein.