This article reviews the progress in the field of polyelectrolyte multilayer membranes with special attention to freestanding membranes. These can be prepared both in the form of hollow capsules and as flat membrane sheets. While (bio) functionality, or bioactivity as it is known, from solid supported multilayers is maintained, additional applications arise for the freestanding membranes in the fields of encapsulation, separation and micromechanics. The production processes and functionalities achieved for capsules and flat sheets. The integration of membranes into larger scale structures is essential for their use and an overview of existing strategies is given. In particular, the way in which arrays of micro-compartments can be built up is shown, and their potential for sensing and combinatorial chemistry discussed. Recent results on the applications of such systems as membrane sensors in the case of flat membrane sheets are also discussed.