Recent blackouts have shown that the power system is greatly vulnerable to high-risk disturbances. While the power systems seem more reliable than before, wide area cascading outages frequently occur. In this paper, a comprehensive literature survey on the theory, development, and application of controlled islanding in power systems against wide area blackouts is provided. Several implemented methods for different stages of islanding schemes, including where, when, how, and what to do, are reviewed thoroughly. The concept of intelligent controlled islanding based on WAMPAC (Wide Area Monitoring, Protection and Control) structure to form islands in the power system is also highlighted aiming at establishing an adaptive optimal scheme.