Underwater terrain-aided navigation (TAN) can obtain high-precision positioning independently and autonomously under the conditions of a communication rejection space, which is an important breakthrough for the autonomous and refined operation of deep-sea autonomous underwater vehicles near the seabed. Although TAN originated in the aviation field, the particularity of the underwater physical environment has led to the formation of a different theoretical and technical system. In this article, the application background, operating principles, and most important technical aspects of underwater TAN are introduced. Then, the relevant algorithms involved in the two main modules (the terrain-aided positioning module and the iterative filtering estimation module) of the underwater TAN are reviewed. Finally, other cutting-edge issues in the field of underwater TAN are summarized. The purpose of this article is to provide researchers with a comprehensive understanding of the current research status and possible future developments in the TAN field.