Virtual fencing (VF) technology represents an innovative approach to livestock management, utilizing GPS-enabled collars to establish invisible boundaries through auditory and mild electrical stimuli. While VF offers potential benefits such as enhanced pasture management flexibility and reduced labor costs, its widespread adoption faces challenges including high initial investment costs, connectivity issues, GPS accuracy limitations, potential device durability concerns, and individual animal variability in learning and response. Furthermore, despite studies showing rapid learning and generally minimal long-term welfare impacts, questions remain regarding optimizing training protocols, addressing occasional short-term behavioral disruptions and collar abrasions, assessing long-term welfare effects across diverse systems (especially intensive and dairy), and improving scalability. To comprehensively assess the potential and limitations of this technology and guide its future development and implementation, a review integrating existing knowledge on the efficacy, welfare implications, and practical applications of VF in cattle production systems is essential. This review examines the efficacy, welfare implications, and practical applications of VF in cattle production systems. Studies demonstrate that cattle rapidly learn to associate auditory cues with electrical pulses, achieving high containment rates (>= 90%) within days, with minimal long-term welfare impacts as indicated by stable cortisol levels. However, short-term behavioral disruptions and occasional collar-related abrasions have been reported, particularly in dairy cattle. While VF enhances pasture management flexibility and reduces labor costs, challenges such as connectivity issues, individual animal variability, and high initial investment costs limit its widespread adoption. The findings suggest that VF is a promising tool for precision livestock farming, though further research is needed to optimize training protocols, assess long-term welfare effects, and improve scalability across diverse farming systems.