Research of the past decade has increased our understanding of the role adipose tissue plays in health and disease. Adipose tissue is now recognized as a highly active metabolic and endocrine organ. Adipocytes are of importance in buffering the daily influx of dietary fat and exert autocrine, paracrine and/or endocrine effects by secreting a variety of adipokines. The normal function of adipose tissue is disturbed in obesity, and there is accumulating evidence to suggest that adipose tissue dysfunction plays a prominent role in the development and/or progression of insulin resistance. Obese individuals often have enlarged adipocytes with a reduced buffering capacity for lipid storage, thereby exposing other tissues to an excessive influx of lipids, leading to ectopic fat deposition and insulin resistance in situations where energy intake exceeds energy expenditure. In addition, adipose tissue blood flow is decreased in obesity. This impairment may affect lipid handling in adipose tissue and, thereby, further contribute to excessive fat storage in non-adipose tissues. On the other hand, adipose tissue hypoperfusion may induce hypoxia in this tissue. Adipose tissue hypoxia may result in disturbances in adipokine secretion and increased macrophage infiltration in adipose tissue, events that are frequently observed in obesity. In this review, it is discussed how enlarged adipocytes, an impaired blood flow through adipose tissue, adipose tissue hypoxia, adipose tissue inflammation and macrophage infiltration are interrelated and may induce insulin resistance.