During the past decade, ionic-liquid-based Aqueous Biphasic Systems (ABS) have been the focus of a significant amount of research. Based on a compilation and analysis of the data hitherto reported, this critical review provides a judicious assessment of the available literature on the subject. We evaluate the quality of the data and establish the main drawbacks found in the literature. We discuss the main issues which govern the phase behaviour of ionic-liquid-based ABS, and we highlight future challenges to the field. In particular, the effect of the ionic liquid structure and the various types of salting-out agents (inorganic or organic salts, amino acids and carbohydrates) on the phase equilibria of ABS is discussed, as well as the influence of secondary parameters such as temperature and pH. More recent approaches using ionic liquids as additives or as replacements for common salts in polymer-based ABS are also presented and discussed to emphasize the expanding number of aqueous two-phase systems that can actually be obtained. Finally, we address two of the main applications of ionic liquid-based ABS: extraction of biomolecules and other added-value compounds, and their use as alternative approaches for removing and recovering ionic liquids from aqueous media.