Liquid immersion has been used for more than 100 years to increase the numeric aperture (NA) and resolution in optical microscopy. We explore the benefits and limitations of immersion technology in lithography. Immersion optical lithography has the potential to extend the resolution below 40 nm. The theory of immersion is decribed. Simulations show that a 193-nm immersion system at NA = 0.95 can double the depth of focus as compared to a dry system. Also, an immersion 193-nm system at NA = 1.05 has slightly more depth of focus than a 157-nm dry system at NA = 0.85. However, the exposure latitude at 193 nm is decreased due to the impact of polarization in imaging. Design schemes are presented to realize an immersion step and scan system. Two configuration approaches are proposed and explored. A localized shower type solution may be preferred over a bath type solution, because the impact on the step and scan platform design is significantly less. However, scanning over the wafer edge becomes the main design challenge with a shower solution. Studies are presented that look at the interaction of immersion fluids with the lens and the photoresist. Water seems to be a likely candidate, as it does not impact productivity of the step and scan system; however, focus and aberration levels need to be carefully controlled. For 157 nm, per-fluor-polyether (PFPE) materials are currently being studied, but their characteristics may limit the productivity of the exposure system. Further research on fluid candidates for 157-nm immersion is required.