In the focus of attention at the present time are the new rare earth‐cobalt‐based magnet alloys. This paper is primarily a qualitative review of the physical phenomena controlling their behavior and of the materials problems these magnets have posed. It also provides an outlook at possibilities for the development of still better or cheaper permanent magnets which current research on rare earth‐ transition metal alloys appears to provide. The origins of the magnetic moments and the crystal anisotropy of rare earth‐transition metal phases are discussed. Alternative concepts of the causes of coercivity in powders and sintered bodies are analyzed. Some basic aspects of the sintering of R‐Co compacts and the magnetic hardening of R–Co–Cu alloys in the massive state are reviewed. Specific problems related to particular alloys and applications of the magnets are pointed out. The conclusion is drawn that the new family of permanent magnets now emerging rivals in complexity both the Alnicos and the ferrites together. There are many development opportunities for the future, and we can expect that, eventually, magnets based on high‐anisotropy alloys containing rare earths will be offered in a variety of grades, covering a wide range of properties and prices, and that they will be produced by several drastically different methods.