This paper presents a review of the current understanding of magnetic nozzle physics. The crucial steps necessary for thrust generation in magnetic nozzles are energy conversion, plasma detachment, and momentum transfer. The currently considered mechanisms by which to extract kinetic energy from the plasma include the conservation of the magnetic moment adiabatic invariant, electric field forces, thermal energy directionalization, and Joule heating. Plasma detachment mechanisms discussed include resistive diffusion, recombination, magnetic reconnection, loss of adiabaticity, inertial forces, and self-field detachment. Momentum transfer from the plasma to the spacecraft occurs due to the interaction between the applied field currents and induced currents which are formed due to the magnetic pressure. These three physical phenomena are crucial to thrust generation and must be understood to optimize magnetic nozzle design. The operating dimensionless parameter ranges of six prominent experiments are considered and the corresponding mechanisms are discussed. © 2012 by the American Institute of Aeronautics and Astronautics, Inc. All rights reserved.