Empathy allows individuals to share the affective states of others, predict others’ actions, and stimulate prosocial behavior. Whilst the proximate mechanisms of empathy, modulated in part by neuropeptides such as oxytocin, control the ways we interact with our social environment, the ultimate causes seem to have arisen along with the mechanisms involved in mammalian parental care. The conceptual boundaries of empathy, however, have been blurred by definitional inaccuracies of mechanisms that can be regarded as phylogenetic precursors or physiological prerequisites for empathy, including mimicry and emotion contagion. Contextual factors such as early experiences with primary care-givers (attachment), current mood states and other environmental contingencies are capable of modulating empathy. Moreover, evidence suggests that there is also a “dark side” of empathy, namely envy and schadenfreude (gloating) that are elicited by social comparison, competition and ingroup–outgroup distinction. This review aims at clarifying some of the open definitional questions related to empathy, and emphasizing the need for considering contextual factors in the study of empathy in both normal and abnormal psychology.