A critical analysis of (trans)dermal delivery of substances encapsulated within liposomes and liposomes is presented. Topical liposomes or niosomes may serve as solubilization matrix, as a local depot for sustained release of dermally active compounds, as penetration enhancers, or as rate-limiting membrane barrier for the modulation of systemic absorption of drugs. The mechanism(s) of vesicle-skin interaction and drug delivery are being extensively investigated using radioactive- or fluorescence-labeled marker molecules and drugs, and various electron and (laser) light microscopic visualization techniques, and different models describing the interaction with and fate of vesicles in the skin have been proposed. With the current experimental data base on hand, most investigators agree that direct contact between vesicles and skin is essential for efficient delivery, although phospholipids per se apparently do not penetrate into deeper skin layers. Investigators have mostly focused on dermal corticosteroid liposome products. However, localized effects of liposome-associated proteins such as superoxide dismutase, tissue growth factors and interferons appear also to be enhanced. The delivery of liposome-encapsulated proteins and enzymes into deeper skin layers has been reported, although the mechanism of delivery remains to be elucidated. An objective assessment of the performance of topical liposome formulations vs. conventional dosage forms is frequently obscured by investigators comparing equal concentrations, rather than equivalent thermodynamic activities of their respective formulations. We conclude that liposomes and niosomes may become a useful dosage form for a variety of dermally active compounds, specifically due to their ability to modulate drug transfer and serve as nontoxic penetration enhancers.