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The advancements in electronics and the progress in nanotechnology have resulted in path breaking development that will transform the way diagnosis and treatment are carried out currently. This development is Medical Capsule Robots, which has emerged from the science fiction idea of robots travelling inside the body to diagnose and cure disorders. The first marketed capsule robot was a capsule endoscope developed to capture images of the gastrointestinal tract. Today, varieties of capsule endoscopes are available in the market. They are slightly larger than regular oral capsules, made up of a biocompatible case and have electronic circuitry and mechanisms to capture and transmit images. In addition, robots with diagnostic features such as in vivo body temperature detection and pH monitoring have also been launched in the market. However, a multi-functional unit that will diagnose and cure diseases inside the body has not yet been realized. A remote controlled capsule that will undertake drug delivery and surgical treatment has not been successfully launched in the market. High cost, inadequate power supply, lack of control over drug release, limited space for drug storage on the capsule, inadequate safety and no mechanisms for active locomotion and anchoring have prevented their entry in the market.The capsule robots can revolutionize the current way of diagnosis and treatment. This paper discusses in detail the applications of medical capsule robots in diagnostics, drug delivery and surgical treatment. In diagnostics, detailed analysis has been presented on wireless capsule endoscopes, issues associated with the marketed versions and their corresponding solutions in literature. Moreover, an assessment has been made of the existing state of remote controlled capsules for targeted drug delivery and surgical treatment and their future impact is predicted. Besides the need for multi-functional capsule robots and the areas for further research have also been highlighted.