ISG15 is a 17 kDa protein encoded by an interferon stimulated gene. Described in 1979, it was the first ubiquitin-like modifier to be identified, and its discovery followed the first reports of ubiquitin by only four years. While many important functions for ubiquitin have been reported, the functions for ISG15 and its conjugation are still largely unknown. Evidence suggests that ISG15 and its modification system play important roles in the innate immune response, regulation of interferon signaling, pregnancy, and several cancers. Modification of proteins by ISG15 occurs in a manner similar to that of ubiquitin and other ubiquitin-like modifiers. The enzymes which help perform the activation and conjugation of ISG15 have recently been identified. The conjugation enzyme identified for ISG15 was revealed to be an enzyme that was also involved in ubiquitin conjugation. Identification of an ISG15 specific protease has also been reported. Knockout of this protease in mice decreases the lifespan of these mice and makes them hypersensitive to treatment with interferon or lipopolysaccharide. The study of ISG15 and its modification system may yield a set of potentially useful therapeutic targets and thus, there is an increasing awareness and interest in this protein modifier. This review will highlight the history of its discovery, describe more recent observations about the enzymes involved in ISG15 modification, and summarize new findings which have important implications for the ISG15 system in signal transduction and immunology. This review will also point out important questions that remain to be answered and identify the major roadblocks which currently obstruct the understanding of ISG15 biologic functions.