Despite the imminent commercial introduction of Li-ion batteries in electric drive vehicles and their proposed use as enablers of smart grids based on renewable energy technologies, an intensive quest for new electrode materials that bring about improvements in energy density, cycle life, cost, and safety is still underway. This Progress Report highlights the recent developments and the future prospects of the use of phases that react through conversion reactions as both positive and negative electrode materials in Li-ion batteries. By moving beyond classical intercalation reactions, a variety of low cost compounds with gravimetric specific capacities that are two-to-five times larger than those attained with currently used materials, such as graphite and LiCoO2, can be achieved. Nonetheless, several factors currently handicap the applicability of electrode materials entailing conversion reactions. These factors, together with the scientific breakthroughs that are necessary to fully assess the practicality of this concept, are reviewed in this report.