Despite considerable efforts to find other substituents, carbon still remains the only commercially viable negative electrode (anode) material for Li-on batteries. Present work aimed at understanding, characterising and improving the performance of carbon anode materials is reviewed. A brief historical background of developments in carbon host lattices is presented. A wide range of carbon materials from amorphous to highly oriented graphitic materials and the techniques employed in characterisation of the lithium insertion/de-insertion process are outlined. Fundamental investigations of the electrochemical process on natural graphite, as well as highly oriented pyrolitic graphite materials, are then comprehensively reviewed. The problems and prospects of different hard carbon materials which increased battery capacity are then discussed. A variety of new carbon materials and carbon-based composites are also introduced. The critical review ends with an overview of the present status of carbon materials and their role in Li-ion battery systems for different potential applications.