This work addresses various aspects associated with the compensation of polarization mode dispersion (PMD) in optical transmission systems. Analytical and simulated results predict the expected PMD tolerance of state-of-the-art optical communication systems with NRZ modulation to be in the order of 15% of the bit duration, i.e. 15 ps for 10 Gbit/s systems and 3.75 ps for 40 Gbit/s systems. These results have been theoretically and experimentally verified. Further investigations showed that in the case of RZ transmission, the pulse width should be chosen as high as possible to improve the PMD tolerance of the system. Since techniques for measuring polarization and PMD play an important role in characterizing optical systems as well as for generating error signals for optical PMD compensators, this work describes algorithms for self-calibrating optical Stokes polarimeters, a compact implementation of a Stokes polarimeter and techniques to accurately measure the PMD of optical fibers and components. Further investigations show how the degree of polarization (DOP) can be used to derive a 3-dimensional error signal giving access to the link’s PMD properties, namely differential group delay (DGD) and principal states (PSPs). Finally, different concepts for compensating PMD are presented and successfully demonstrated in experiments over installed fiber. These concepts include different methods of tuning the PMD of the compensator, e.g. by mechanically stretching a fiber Bragg grating or by applying a tunable magnetic field. Fully automatic compensation is demonstrated at bit rates ranging from 10 Gbit/s to 160 Gbit/s.