Acid sphingomyelinase (ASM), a key enzyme in sphingolipid metabolism, hydrolyzes sphingomyelin to ceramide and phosphorylcholine. In mammals, the expression of a single gene, SMPD1, results in two forms of the enzyme that differ in several characteristics. Lysosomal ASM (L-ASM) is located within the lysosome, requires no additional Zn2+ ions for activation and is glycosylated mainly with high-mannose oligosaccharides. By contrast, the secretory ASM (S-ASM) is located extracellularly, requires Zn2+ ions for activation, has a complex glycosylation pattern and has a longer in vivo half-life. In this review, we summarize current knowledge regarding the physiology and pathophysiology of S-ASM, including its sources and distribution, molecular and cellular mechanisms of generation and regulation and relevant in vitro and in vivo studies. Polymorphisms or mutations of SMPD1 lead to decreased S-ASM activity, as detected in patients with Niemann-Pick disease B. Thus, lower serum/plasma activities of S-ASM are trait markers. No genetic causes of increased S-ASM activity have been identified. Instead, elevated activity is the result of enhanced release (e.g., induced by lipopolysaccharide and cytokine stimulation) or increased enzyme activation (e.g., induced by oxidative stress). Increased S-ASM activity in serum or plasma is a state marker of a wide range of diseases. In particular, high S-ASM activity occurs in inflammation of the endothelium and liver. Several studies have demonstrated a correlation between S-ASM activity and mortality induced by severe inflammatory diseases. Serial measurements of S-ASM reveal prolonged activation and, therefore, the measurement of this enzyme may also provide information on past inflammatory processes. Thus, S-ASM may be both a promising clinical chemistry marker and a therapeutic target.