• XPS is a powerful tool to study surface properties within < 10 nm. • This is a pedagogical review on XPS based surface characterization. • Applications in materials, nanotechnology and corrosion evaluation are reviewed. • Issues related to the accurate analysis of XPS are also highlighted. • Challenges in phase composition identification are discussed. X-ray photoelectron spectroscopy (XPS) is a powerful tool to study surface properties (< 10 nm) and is being widely used in almost all branches of science and engineering. This review provides a pedagogical description of the fundamental understanding of XPS based surface characterization with the necessary background and key concepts, details on primary factors influencing surface analysis, issues in XPS analysis and identification of chemical bonding/oxidation state of elements. The basic theory of XPS and the most frequently used “core level peaks” analysis in the conventional use of XPS are presented, along with the details of valence band analysis. The challenges encountered during surface analysis, especially for phase composition identification, are briefly discussed. Further, a few selected recent applications of the XPS technique in various scientific fields are also highlighted. The recent development in the area of surface phase identification by valence band analysis using XPS, along with its advantages and challenges in the determination of nanoscale thin film phase composition are also detailed. This review also provides an overview of the significance of XPS as a tool for surface characterization in the field of material science, nanoscience, mining and mineral extraction, metallurgy, semiconductors, coatings, inorganic materials, tribology, organic materials, corrosion science and electrochemistry. The review should be an ideal material for researchers and also serves as an excellent reference for freshers who plan to begin research on this topic.