Biodiesel has become more attractive recently because of its environmental benefits and the fact that it is made from renewable resources. The cost of biodiesel, however, is the main hurdle to commercialization of the product. The used cooking oils are used as raw material, adaption of continuous transesterification process and recovery of high quality glycerol from biodiesel by-product (glycerol) are primary options to be considered to lower the cost of biodiesel. There are four primary ways to make biodiesel, direct use and blending, microemulsions, thermal cracking (pyrolysis) and transesterification. The most commonly used method is transesterification of vegetable oils and animal fats. The transesterification reaction is affected by molar ratio of glycerides to alcohol, catalysts, reaction temperature, reaction time and free fatty acids and water content of oils or fats. The mechanism and kinetics of the transesterification show how the reaction occurs and progresses. The processes of transesterification and its downstream operations are also addressed.