With the advances in understanding perceptual properties of the human visual system and constructing their computational models, efforts toward incorporating human perceptual mechanisms in video compression to achieve maximal perceptual quality have received great attention. This paper thoroughly reviews the recent advances of perceptual video compression mainly in terms of the three major components, namely, perceptual model definition, implementation of coding, and performance evaluation. Furthermore, open research issues and challenges are discussed in order to provide perspectives for future research trends.