Micro-optical components, such as diffractive and refractive microlenses, micromirrors, beamsplitters, and beam combiners, have recently received considerable attention in the optics R&D centers and finally in the manufacturing community. This achievement is due to micro-electro-mechanical (MEM) technology that has demonstrated major improvements in overall performance and cost of optical systems while offering the possibility of relativity rapid transition to products for military, industrial, and consumer markets. Because of these technology advances, an industrial infrastructure is rapidly becoming established to combine micro-optical components and MEM-based microactuators for on-chip optical processing. Optical systems that once were considered to be impractical due to the limitations of bulk optics can now easily be designed and fabricated with all required optical paths, signal conditioning, and electronic controls integrated on a single chip. On-chip optical processing will enhance the performance of devices such as focal-plane optical concentrators, smart actuators, color separators, beam shapers, fiber data distribution interface (FDDI) switches, digital micromirror devices (DMDs), and miniature optical scanners. We review advances in microoptical components developed at the Rockwell Science Center. We also review the potential of on-chip optical processing and the recent achievement of free-space integrated optics and micro-optical bench components developed at UCLA, and DMDs developed at Texas Instruments.