Liposomes are small vesicles having one or more concentric phospholipid bilayers, interspersed with aqueous phase. Thermal analysis, particularly differential scanning calorimetry (DSC) has been used extensively to study the behavior of hydrated phospholipids within bilayers. On heating, and dependent on the state of hydration, phospholipids undergo a series of phase transitions. This paper reviews investigations of the phase transition behaviour of single component phospholipid systems, bilayers having mixtures of phospholipids and bilayers containing phospholipid-cholesterol mixtures. Liposomes are being extensively studied for use as colloidal drug delivery systems. Inclusion of therapeutic agents into liposomal systems may have pronounced effects on the phospholipid phase transition behaviour and consequently bilayer fluidity. These effects are determined by the location of the therapeutic agent within the bilayer. The interactions of electrolytes and steroids with phospholipids are discussed. The use of DSC studies of drug-liposome interactions as models of drug-cell membrane interactions is also discussed.