Future electricity network must be flexible, accessible, reliable and economically viable to realise the aims of the smart grid initiative. In order to achieve these objectives and to reduce greenhouse gas (GHG) emissions, research on various configurations or architectures of microgrid (µGrid) systems is gaining greater attention. This is occurring in step with increasing penetration of Renewable Energy Sources (RES) such as solar, wind and other micro-sources. Energy storage can also be a part of the µGrid architecture to ensure more stable and sustainable operation. The techno-economic viability of the µGrid system is also a point of concern. Again, the variable and uncontrollable behaviour of RES can also introduce power quality problems. To improve the systems reliability, efficiency and power quality, different µGrid architectures are introduced. Complex control of the µGrid controller is helping to overcome these conditions. In that case, integration of Custom Power Devices is also playing an important role. Therefore, µGrid policies should also deal with these issues in the light of future trends towards the Smart Grid. This paper presents a literature review, based on various existing and/or simulated µGrid architectures. In relation to the reliability, efficiency and power quality issues, different distribution systems have been introduced. The advantages and disadvantages of these configurations are discussed here. The benefits of RES and its associated power quality problems have been identified. The benefits of energy storage systems and the development of communication systems towards the stable, flexible and efficient operation of smart grids are also reviewed. Findings have been outlined and then the policies with future trends of µGrid are also discussed.