Smart power systems’ electrical infrastructure is still expanding, and several strategies have been established to increase energy management and efficiency. Demand Response (DR) is a scheme that allows the consumer to participate in that scheme, which provides benefits for users by providing incentives, reduces the grid stress, and enhances the system’s reliability by adjusting their load demand. Some key challenges of the DR Program are regulatory policies, customer participation, and sometimes bad incentives provided by stakeholders/energy providers. However, DR has some advantages, such as grid stability, grid reliability, renewable energy integration, and financial benefits due to the involvement of the market. Demand Response is now a practical and even appealing way to boost electrical system flexibility because to advancements in IT, control, and prediction capabilities. This paper provides a comprehensive literature review of the different schemes of DR and their advantages. It also discusses the different challenges, opportunities, and future directions.