Auditory localization is a fundamental ability that allows to perceive the spatial location of a sound source in the environment. The present work aims to provide a comprehensive overview of the mechanisms and acoustic cues used by the human perceptual system to achieve such accurate auditory localization. Acoustic cues are derived from the physical properties of sound waves, and many factors allow and influence auditory localization abilities. This review presents the monaural and binaural perceptual mechanisms involved in auditory localization in the three dimensions. Besides the main mechanisms of Interaural Time Difference, Interaural Level Difference and Head Related Transfer Function, secondary important elements such as reverberation and motion, are also analyzed. For each mechanism, the perceptual limits of localization abilities are presented. A section is specifically devoted to reference systems in space, and to the pointing methods used in experimental research. Finally, some cases of misperception and auditory illusion are described. More than a simple description of the perceptual mechanisms underlying localization, this paper is intended to provide also practical information available for experiments and work in the auditory field.