Lung cancer is an exceedingly malignant tumor reported as having the highest morbidity and mortality of any cancer worldwide, thus posing a great threat to global health. Despite the growing demand for precision medicine, current methods for early clinical detection, treatment and prognosis monitoring in lung cancer are hampered by certain bottlenecks. Studies have found that during the formation and development of a tumor, molecular substances carrying tumor-related genetic information can be released into body fluids. Liquid biopsy (LB), a method for detecting these tumor-related markers in body fluids, maybe a way to make progress in these bottlenecks. In recent years, LB technology has undergone rapid advancements. Therefore, this review will provide information on technical updates to LB and its potential clinical applications, evaluate its effectiveness for specific applications, discuss the existing limitations of LB, and present a look forward to possible future clinical applications. Specifically, this paper will introduce technical updates from the prospectives of engineering breakthroughs in the detection of membrane-based LB biomarkers and other improvements in sequencing technology. Additionally, it will summarize the latest applications of liquid biopsy for the early detection, diagnosis, treatment, and prognosis of lung cancer. We will present the interconnectedness of clinical and laboratory issues and the interplay of technology and application in LB today.