Solid dispersions in water-soluble carriers have attracted considerable interest as a means of improving the dissolution rate, and hence possibly bioavailability, of a range of hydrophobic drugs. However, despite the publication of numerous original papers and reviews on the subject, the mechanisms underpinning the observed improvements in dissolution rate are not yet understood. In this review the current consensus with regard to the solid-state structure and dissolution properties of solid dispersions is critically assessed. In particular the theories of carrier- and drug-controlled dissolution are highlighted. A model is proposed whereby the release behaviour from the dispersions may be understood in terms of the dissolution or otherwise of the drug into the concentrated aqueous polymer layer adjacent to the solid surface, including a derivation of an expression to describe the release of intact particles from the dispersions. The implications of a deeper understanding of the dissolution mechanisms are discussed, with particular emphasis on optimising the choice of carrier and manufacturing method and the prediction of stability problems.