Capsule endoscopy (CE) enables remote diagnostic inspection of the gastrointestinal tract without sedation and with minimal discomfort. Initially intended for small-bowel endoscopy, modifications to the original capsule have since been introduced for imaging of the esophagus and the colon. This Review presents a research update on CE. Emphasis is placed on PillCamTM SB, PillCamTM ESO, and PillCamTM COLON (Given Imaging, Yoqneam, Israel) since the majority of published studies have investigated these devices. Discussion of initial reports on competing devices, such as EndoCapsuleTM (Olympus, Tokyo, Japan) and MiroCamTM (IntroMedic Co., Seoul, Republic of Korea) are also included. The last section of this Review outlines ongoing research and development directed at the identification of capsule location, control of capsule movement and expansion of the capability of microcameras to enhance the diagnostic power of CE. Research efforts aimed at endowing the capsule with a range of functionalities are also discussed, from tissue sampling for biopsy to optical biopsy and, in some cases, actual treatment (interventional CE), so that CE may ultimately replace both diagnostic and interventional flexible endoscopy.