Since the introduction of oxygen as a therapeutic agent 70 years ago, much has been learned regarding the detrimental effects of hypoxemia and the beneficial impact of oxygen therapy. It is projected that there are close to 800,000 patients receiving long-term oxygen therapy (LTOT) in the United States, at a cost of approximately $1.8 billion annually. The large numbers of patients receiving supplemental oxygen as treatment and the high costs incurred in providing oxygen therapy necessitate the practitioner to know the indications for LTOT as well its effects on survival, pulmonary hemodynamics, sleep, and exercise capacity. It is now recognized that the basis for LTOT prescription for all patients is founded on data that are over 25 years old and that only involve a very select cohort of patients. It is clear that further studies are required to assess the effects of oxygen on patients with chronic obstructive pulmonary disease with only mild hypoxemia, not only survival but also on neurocognitive function, quality of life, exercise physiology, and sleep quality. In addition, although proven to be safe when prescribed long term to individuals with lung disease, there are some concerns about worsening carbon dioxide retention and increased oxidant injury. The goals of this article are to briefly describe the indications for chronic oxygen administration, the physiologic effects of treatment, and potential toxicities, as well as its effect on morbidity and mortality.