Nanofluids, engineered suspensions of nanoparticles in base fluids, have gained significant attention due to their superior thermal, electrical, and rheological properties, making them highly suitable for diverse applications such as heat transfer, cooling systems, biomedical engineering, and industrial processes. This chapter provides a comprehensive overview of the evolution, synthesis, characterization, and applications of nanofluids, along with their challenges and future prospects. Various factors influencing their thermal performance, including particle shape, size, concentration, and dispersion stability, are discussed in detail. Despite their remarkable advantages, several critical challenges hinder their widespread implementation, including nanoparticle aggregation, inconsistent experimental results, high production costs, and potential environmental and health risks. Studies indicate that carbon-based nanofluids, particularly CNT nanofluids, exhibit superior thermal conductivity compared to oxide nanofluids, yet a precise theoretical framework to explain these differences remains elusive. Furthermore, the role of Brownian motion, thermophoresis, and entropy generation in nanofluid behavior has been explored, emphasizing the need for further experimental and theoretical advancements. Stability remains a primary concern, as nanoparticle clustering over time degrades performance. The chapter also highlights recent efforts in enhancing nanofluid stability through surfactant incorporation, surface modifications, and optimized synthesis techniques. To fully harness their potential, future research should focus on scalable and cost-effective production methods, eco-friendly formulations, and advanced predictive modeling using machine learning. As nanofluids continue to evolve, they hold immense promise in revolutionizing energy efficiency and thermal management systems across various industries.