Anaerobic reactors have acquired a new relevance in recent years due to their ability to generate methane from biodegradable wastewaters—thereby producing clean energy. Methane capture in this manner also prevents the escape of the greenhouse gas to the atmosphere which otherwise occurs when anaerobic conditions develop in drains and outfalls carrying wastewater. Of all the different types of anaerobic reactors in vogue – anaerobic filter, downflow fixed-film reactor, expanded fluidized-bed anaerobic reactor, etc. – the upflow anaerobic sludge blanket (UASB) reactor is arguably the most widely used. Nearly 80% of the world's anaerobic wastewater treatment systems are estimated to be based on the UASB technology. The functioning of a UASB reactor revolves round its sludge bed which gets expanded as the wastewater is made to flow vertically upwards through it. It is the microflora attached to the sludge particles which acts upon the wastewater. Hence the quality of biofilms sported by the sludge particles, and the intimacy of the sludge–wastewater contact are the factors which, principally, govern the success of a UASB reactor. Very early in the development of UASB technology it was realized that granular sludge of appropriate particle size, particle density, and microfilm characteristics enhances the reactor efficiency in terms of the rate as well as the extent of wastewater treatment. From then onwards efforts have been made by scientists across the world to understand the factors which shape the granules and the manner in which the granules contribute to wastewater treatment. The state-of-the-art is presented in this paper.