The last decade has seen an increasing interest in the novel applications of electrical discharge machining (EDM) process, with particular emphasis on the potential of this process for surface modification. Besides erosion of work material during machining, the intrinsic nature of the process results in removal of some tool material also. Formation of the plasma channel consisting of material vapours from the eroding work material and tool electrode; and pyrolysis of the dielectric affect the surface composition after machining and consequently, its properties. Deliberate material transfer may be carried out under specific machining conditions by using either composite electrodes or by dispersing metallic powders in the dielectric or both. This paper presents a review on the phenomenon of surface modification by electric discharge machining and future trends of its applications.