This paper reviews the latest developments in microbial products by encapsulated microorganisms in a liquid core surrounded by natural or synthetic membranes. Cells can be encapsulated in one or several steps using liquid droplet formation, pregel dissolving, coacervation, and interfacial polymerization. The use of encapsulated yeast and bacteria for fermentative production of ethanol, lactic acid, biogas, l-phenylacetylcarbinol, 1,3-propanediol, and riboflavin has been investigated. Encapsulated cells have furthermore been used for the biocatalytic conversion of chemicals. Fermentation, using encapsulated cells, offers various advantages compared to traditional cultivations, e.g., higher cell density, faster fermentation, improved tolerance of the cells to toxic media and high temperatures, and selective exclusion of toxic hydrophobic substances. However, mass transfer through the capsule membrane as well as the robustness of the capsules still challenge the utilization of encapsulated cells. The history and the current state of applying microbial encapsulation for production processes, along with the benefits and drawbacks concerning productivity and general physiology of the encapsulated cells, are discussed.