More than 15 years ago the idea of a Picture Archiving and Communication System (PACS) and a filmless hospital was created. In a PACS environment images are acquired, read, communicated and stored digitally. After many years of unsuccessful attempts and prototype installations, the necessary hardware components for a successful PACS installation are now readily available. However, software development is still lagging behind. Only very recently, software developers have realized that it is not sufficient for PACS software to store, communicate and display images, but that PACS software should effectively support the radiologist in the task of interpreting and communicating imaging findings through context-dependent default display arrangements, work-flow management, radiological and hospital information systems integration, and computer-assisted diagnosis. This review examines hard- and software requirements for efficient PACS operation, analyses costs and benefits, and discusses future developments.