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Prognostics and health management (PHM) is an enabling discipline consisting of technologies and methods to assess the reliability of a product in its actual life cycle conditions to determine the advent of failure and mitigate system risk. Sensor systems are needed for PHM to monitor environmental, operational, and performance-related characteristics. The gathered data can be analyzed to assess product health and predict remaining life. In this paper, the considerations for sensor system selection for PHM applications, including the parameters to be measured, the performance needs, the electrical and physical attributes, reliability, and cost of the sensor system, are discussed. The state-of-the-art sensor systems for PHM and the emerging trends in technologies of sensor systems for PHM are presented.