The global transition toward renewable energy and the electrification of transportation is imposing unprecedented power quality (PQ) challenges on modern distribution networks, rendering traditional governance models inadequate. To bridge the existing research gap of the lack of a holistic analytical framework, this review first establishes a systematic diagnostic methodology by introducing the “Triadic Governance Objectives–Scenario Matrix (TGO-SM),” which maps core objectives—harmonic suppression, voltage regulation, and three-phase balancing—against the distinct demands of high-penetration photovoltaic (PV), electric vehicle (EV) charging, and energy storage scenarios. Building upon this problem identification framework, the paper then provides a comprehensive review of advanced mitigation technologies, analyzing the performance and application of key ‘unit operations’ such as static synchronous compensators (STATCOMs), solid-state transformers (SSTs), grid-forming (GFM) inverters, and unified power quality conditioners (UPQCs). Subsequently, the review deconstructs the multi-timescale control conflicts inherent in these systems and proposes the forward-looking paradigm of “Distributed Dynamic Collaborative Governance (DDCG).” This future architecture envisions a fully autonomous grid, integrating edge intelligence, digital twins, and blockchain to shift from reactive compensation to predictive governance. Through this structured approach, the research provides a coherent strategy and a crucial theoretical roadmap for navigating the complexities of modern distribution grids and advancing toward a resilient and autonomous future.