Soil fauna is a main component of the terrestrial ecosystem and its ecological characteristics and functions has recently aroused more and more concerns from researchers. Much of the interest has come from the need to understand the critical roles of soil fauna in material cycling and energy flow. The review firstly summarizes the ecological characteristics of soil fauna in the following three aspects: (1) definition and classification of soil fauna. (2) abundance, diversity, community structure and distribution pattern of soil fauna. (3) factors influencing these ecological characteristics including natural factors, artificial factors and the global changes. And then the paper reviews the functions of soil fauna in different aspects, focusing mainly on its functions of litter decomposition and ecological indicator. Principles of the litter decomposition function of soil fauna and main research contents in this field are discussed in detail. In the end, the authors point out some scientific problems in the present research of soil fauna and suggest a direction for the future research. This paper aims to have a further understanding of soil fauna and to provide necessary theoretical basis for biodiversity protection, consummation of the ecological index system, reasonable exploitation of the soil resources and realization of sustainable development of the agriculture and ecology.