This paper reviews recent developments in power loss analysis applicable, but not limited to, the thermal design of permanent-magnet machines. Accurate and computationally efficient loss prediction is an essential element in the thermal analysis of electrical machines and has become an increasingly important part of the machine design process. The continuous drive toward "more electric" technologies has resulted in a need for a more comprehensive and detailed design approach, where various multiphysics and multidisciplinary effects are accounted for. This "design for application" methodology relies strongly on the advancements and evolution of the existing theoretical and experimental design techniques to satisfy the evermore-demanding machine design requirements. The thermal behavior and efficiency of the power conversion are essential performance measures in the "design for application" approach. An overview of the challenges and limitations regarding power loss analysis in the context of the thermal design of electrical machines is provided in this paper. All of the major loss components associated with the active parts of a machine assembly are discussed.