Chitosan has many desirable attributes e.g. antimicrobial properties and promoting wound healing, and is used in various applications. This article first discusses how degree of deacetylation (DD) and molecular weight (MW) impacts on what level of bioactivities chitosan manifests, then introduces the "molecular chain configuration" model to explain various possible mechanisms of antimicrobial interactions between chitosan with different MW and different types of bacteria. Similarly, the possible pathways of how chitosan reacts with cancer and the body's immune system to demonstrate immune and antitumor effects are also discussed by using this model. Moreover, the possible mechanisms of how chitosan enhances coagulation and wound healing are also discussed. With these beneficial bioactivities in mind, the application of chitosan in surgery, tissue engineering and oncology is outlined. This review concludes that as chitosan demonstrates many beneficial bioactivities via multiple mechanisms, it is an important polymer with a promising future in medicine.