The review describes recent progress on understanding and quantification of the various phenomena that take place during plasma electrolytic oxidation, which is in increasing industrial use for production of protective coatings and other surface treatment purposes. A general overview of the process, and some information about usage of these coatings, are provided in the first part of the review. The focus is then on the dielectric breakdown that repeatedly occurs over the surface of the work-piece. These discharges are central to the process, since it is largely via the associated plasmas that oxidation of the substrate takes place and the coating is created. The details are complex, since the discharge characteristics are affected by a number of processing variables. The inter-relationships between electrical conditions, electrolyte composition, coating microstructure and rates of growth, which are linked via the characteristics of the discharges, have become clearer over recent years and these improvements in understanding are summarized here. There is considerable scope for more effective process control, with specific objectives in terms of coating performance and energy efficiency, and an attempt is made to identify key points that are likely to assist this.