Plug-in electric vehicles (PEVs) can behave either as loads or as distributed energy sources in a concept known as vehicle-to-grid (V2G). The V2G concept can improve the performance of the electricity grid in areas such as efficiency, stability, and reliability. A V2G-capable vehicle offers reactive power support, active power regulation, tracking of variable renewable energy sources, load balancing, and current harmonic filtering. These technologies can enable ancillary services, such as voltage and frequency control and spinning reserve. Costs of V2G include battery degradation, the need for intensive communication between the vehicles and the grid, effects on grid distribution equipment, infrastructure changes, and social, political, cultural and technical obstacles. Although V2G operation can reduce the lifetime of PEVs, it is projected to be more economical for vehicle owners and grid operators. This paper reviews these benefits and challenges of V2G technology for both individual vehicles and vehicle fleets.