Two phase systems are ubiquitous in processes and products, and in both cases performance is maximized when precise control over the individual phases, and the ensemble, is possible. Microfluidic technologies afford higher levels of control over two-phase systems than is possible in macroscopic process equipment, opening avenues to controlled reactions as well as products having tightly controlled properties including emulsion size distribution. A review of recent progress in two-phase flows in microfluidic devices is presented. The fundamentals of two-phase flows including some important dimensionless numbers are firstly introduced, followed by a review of two-phase flow regimes in gas-liquid and liquid-liquid systems, focusing on microfluidic methods for controlling droplet formation and coalescence. Applications of two-phase microfluidic flows are briefly reviewed, including new approaches to the formation of well-defined complex emulsion which, like a Matryoshka doll, have structure within structure. The large number of recent publications reviewed in this paper highlights the tremendous interest in the fundamental study and use of controlled microfluidic two-phase flows, driven by the promise of highly controlled processes and new products having controlled complexity. (C) 2010 Elsevier Ltd. All rights reserved.