Lipids are essential components of living organisms and support multiple biological and physiological functions in the human body. They serve as the structural building material of all membranes of cells and organelles. Lipids and their derivatives also serve as signaling molecules that facilitate a variety of physiological functions. In addition, lipids are recognized as important biomarkers of disease and are involved in several pathological conditions. Individual fatty acids can influence biological processes, such as membrane-associated receptors and signal transduction systems, and ion channels. Recent literature also demonstrates a specific role of fatty acids in gene modulation and protein expression to influence risk of chronic disease. Polyunsaturated fatty acids (PUFAs) are the focus of substantial research interest in this area mainly because of their ability to be converted to various bioactive regulatory molecules, such as prostaglandins, leukotrienes, and thromboxanes. Arachidonic acid (AA, 20:4n-6) and eicosapentaenoic acid (EPA, 20:5n-3) are two major players in the regulation and production of these bioactive molecules. In addition, an absolute requirement of docosahexaenoic acid (DHA) is necessary for normal neural and retinal development in the infant and young child. Besides the study of these PUFA molecules, numerous animal and human studies also suggest that other dietary lipids, such as cholesterol and saturated fatty acids, increase serum cholesterol as well as LDL-cholesterol concentrations. In summary, this article provides a contemporary understanding of food lipids in nutrition and health, especially the underlying cellular and molecular mechanisms of the actions of these bioactive dietary lipids.