To solve the problem that breakdown maintenance and periodic maintenance can’t meet the needs of maintenance support in many fields, a condition based maintenance technology called prognostics and health management (PHM) is proposed. The conception and significance of the PHM technology are introduced. The structure and function divisions, design procedure and key technologies of PHM system are stated. Fifteen fault prediction methods are compared each other. Problems of developing PHM technology are analyzed. The results show that the technology is important for mechanical equipments to preserve safety and reliability, while it is equally important for maintenance cost saving.