Permeate Gap Membrane Distillation (PGMD) is an emerging desalination technology that offers a promising alternative for freshwater production, particularly in energy-efficient and sustainable applications. This review provides a comprehensive analysis of PGMD, covering its fundamental principles, heat and mass transfer mechanisms, and key challenges such as temperature and concentration polarization. Various optimisation strategies, including Response Surface Morphology (RSM), Differential Evolution techniques, and Computational Fluid Dynamics (CFD) modelling, are explored to enhance PGMD performance. The study further discusses the latest advancements in system design, highlighting optimal configurations and the integration of PGMD with renewable energy sources. Factors influencing PGMD performance, such as operational parameters (flow rates, temperature, and feed concentration) and physical parameters (gap width, membrane properties, and cooling plate conductivity), are systematically analysed. Additionally, the techno-economic feasibility of PGMD for large-scale freshwater production is evaluated, with a focus on cost reduction strategies, energy efficiency, and hybrid system innovations. Finally, this review outlines the current limitations and future research directions for PGMD, emphasising novel system modifications, improved heat recovery techniques, and potential industrial applications. By consolidating recent advancements and identifying key challenges, this paper aims to guide future research and facilitate the broader adoption of PGMD in sustainable desalination and water purification processes.