Mimicry is a classical example of adaptive signal design. Here, we review the current state of research into vocal mimicry in birds. Avian vocal mimicry is a conspicuous and often spectacular form of animal communication, occurring in many distantly related species. However, the proximate and ultimate causes of vocal mimicry are poorly understood. In the first part of this review, we argue that progress has been impeded by conceptual confusion over what constitutes vocal mimicry. We propose a modified version of Vane-Wright's (1980) widely used definition of mimicry. According to our definition, a vocalisation is mimetic if the behaviour of the receiver changes after perceiving the acoustic resemblance between the mimic and the model, and the behavioural change confers a selective advantage on the mimic. Mimicry is therefore specifically a functional concept where the resemblance between heterospecific sounds is a target of selection. It is distinct from other forms of vocal resemblance including those that are the result of chance or common ancestry, and those that have emerged as a by-product of other processes such as ecological convergence and selection for large song-type repertoires. Thus, our definition provides a general and functionally coherent framework for determining what constitutes vocal mimicry, and takes account of the diversity of vocalisations that incorporate heterospecific sounds. In the second part we assess and revise hypotheses for the evolution of avian vocal mimicry in the light of our new definition. Most of the current evidence is anecdotal, but the diverse contexts and acoustic structures of putative vocal mimicry suggest that mimicry has multiple functions across and within species. There is strong experimental evidence that vocal mimicry can be deceptive, and can facilitate parasitic interactions. There is also increasing support for the use of vocal mimicry in predator defence, although the mechanisms are unclear. Less progress has been made in explaining why many birds incorporate heterospecific sounds into their sexual displays, and in determining whether these vocalisations are functionally mimetic or by-products of sexual selection for other traits such as repertoire size. Overall, this discussion reveals a more central role for vocal mimicry in the behavioural ecology of birds than has previously been appreciated. The final part of this review identifies important areas for future research. Detailed empirical data are needed on individual species, including on the structure of mimetic signals, the contexts in which mimicry is produced, how mimicry is acquired, and the ecological relationships between mimic, model and receiver. At present, there is little information and no consensus about the various costs of vocal mimicry for the protagonists in the mimicry complex. The diversity and complexity of vocal mimicry in birds raises important questions for the study of animal communication and challenges our view of the nature of mimicry itself. Therefore, a better understanding of avian vocal mimicry is essential if we are to account fully for the diversity of animal signals.