A hydrate is a solid adduct containing both the parent compound (e.g., the anhydrate of a drug or excipient) and water. This review discusses only the crystalline stoichiometric hydrates in which the environment of the water molecules exhibits various defined patterns, and emphasizes pharmaceutical hydrates and their behavior. The presence of the water molecules influences the intermolecular interactions (affecting the internal energy and enthalpy) and the crystalline disorder (entropy), and hence influences the free energy, thermodynamic activity, solubility, dissolution rate, stability, and bioavailability. In addition, many solid-state properties are altered, including mechanical behavior, such as tableting, grinding, and product performance. The physicochemical characterization of hydrates is included in a flow chart of questions to be answered as part of a "decision tree" during the process of product development. Pharmaceutical hydrates may be characterized by a variety of complementary physicochemical methods most of which are well-known. This review details the characterization of hydrates by solid-state nuclear magnetic resonance spectroscopy, Raman spectroscopy, and isothermal microcalorimetry, and considers a variety of pharmaceutical examples.