The concept of a bio-based economy has been adopted by many advanced countries around the world, and thermochemical conversion of waste biomass is recognized as the most effective approach to achieve this objective. Recent studies indicate that hydrothermal carbonization (HTC) is a promising method for the conversion of waste biomass towards novel carbonaceous materials known as hydrochars. This cost-effective and eco-friendly process operates at moderate temperatures (180–280 °C) and uses water as a reaction medium. HTC has been successfully applied to a wide range of waste materials, including lignocellulose biomass, sewage sludge, algae, and municipal solid waste, generating desirable carbonaceous products. This review provides an overview of the key HTC process parameters, as well as the physical and chemical properties of the obtained hydrochar. It also explores potential applications of produced materials and highlights the modification and functionalization techniques that can transform these materials into game-changing solutions for a sustainable future.