Abstract: In semiconductor optical amplification (SOA) the nonlinearity coefficient is about 109 times greater than that in commercial optical fiber and 107 times that in photonic crystals. There are four interactions involved with two beams of light: cross gain modulation, cross phase modulation, cross state-of-polarization modulation, and four-wave maxing. Thus, SOA can be flexibly incorporated into many kinds of all-optical processing devices, such as wavelength converters, all-optical flip-flop switches, logic devices, clock recovery, buffers, and so forth. Indeed, it is now becoming the cornerstone of optical signal processing. The principle of SOA and its basic applications are reviewed.