A real-time imaging system based on terahertz (THz) time-domain spectroscopy has been demonstrated. This technique offers a range of unique imaging modalities due to the broad bandwidth, sub-picosecond duration, and phase-sensitive detection of the THz pulses. This paper provides an introduction of the state-of-the art in THz imaging. It also focuses on expanding the potential of this new and exciting field through two major efforts. The first concentrates on improving the experimental sensitivity of the system. We are exploring an interferometric arrangement to provide a background-free reflection imaging geometry. The second applies novel digital signal processing algorithms to extract useful information from the THz pulses. The possibility exists to combine spectroscopic characterization and/or identification with pixel-by-pixel imaging.