Plasma electrolytic oxidation (PEO), also called micro-arc oxidation (MAO), is an innovative method in producing oxide-ceramic coatings on metals, such as aluminum, titanium, magnesium, zirconium, etc. The process is characterized by discharges, which develop in a strong electric field, in a system consisting of the substrate, the oxide layer, a gas envelope, and the electrolyte. The electric breakdown in this system establishes a plasma state, in which, under anodic polarization, the substrate material is locally converted to a compound consisting of the substrate material itself (including alloying elements) and oxygen in addition to the electrolyte components. The review presents the process kinetics according to the existing models of the discharge phenomena, as well as the influence of the process parameters on the process, and thus, on the resulting coating properties, e.g., morphology and composition.