Thanks to the developments in the area of microfluidics, the cavitation-on-a-chip concept enabled researchers to control and closely monitor the cavitation phenomenon in micro-scale. In contrast to conventional scale, where cavitation bubbles are hard to be steered and manipulated, lab-on-a-chip devices provide suitable platforms to conduct smart experiments and design reliable devices to carefully harness the collapse energy of cavitation bubbles in different bio-related and industrial applications. However, bubble behavior deviates to some extent when confined to micro-scale geometries in comparison to macro-scale. Therefore, fundamentals of micro-scale cavitation deserve in-depth investigations. In this review, first we discussed the physics and fundamentals of cavitation induced by tension-based as well as energy deposition-based methods within microfluidic devices and discussed the similarities and differences in micro and macro-scale cavitation. We then covered and discussed recent developments in bio-related applications of micro-scale cavitation chips. Lastly, current challenges and future research directions towards the implementation of micro-scale cavitation phenomenon to emerging applications are presented.