The biological membrane may be viewed as a two-dimensional solvent system, the lipid bilayer, in which the membrane components are either dissolved (intrinsic) or to the surface of which they are adsorbed (extrinsic). The solvent bilayer is made up of a large number of lipid chemical species derived from a few lipid classes. Experience with model systems has shown that in mixed lipid bilayers immiscibility of components is the rule rather than the exception. This suggests that the bilayer in a biological membrane is not a homogenous two-dimensional fluid but rather a heterogenous system consisting of a mosaic of co-existing phase domains in which the phases differ both chemically and physically from each other. A consequence of this is the physical separation of membrane components, including proteins, based on their phase solubility. The percolation in such a phase-separated system then determines the range over which free lateral diffusion is possible and bimolecular reactions can occur. Phase percolation and long-range translational diffusion have been studied in model systems using the fluorescence recovery after photobleaching (FRAP) technique, and theoretical work shows that bimolecular reaction yields can be seriously reduced in phase-separated membranes. Transitions between percolating and non-percolating states in biomembranes is proposed as a potential trigger mechanism in the control of membrane physiology.