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Energy-efficient desalination and water treatment technologies play a critical role in augmenting freshwater resources without placing an excessive strain on limited energy supplies. By desalinating high-salinity waters using low-grade or waste heat, membrane distillation (MD) has the potential to increase sustainable water production, a key facet of the water-energy nexus. However, despite advances in membrane technology and the development of novel process configurations, the viability of MD as an energy-efficient desalination process remains uncertain. In this review, we examine the key challenges facing MD and explore the opportunities for improving MD membranes and system design. We begin by exploring how the energy efficiency of MD is limited by the thermal separation of water and dissolved solutes. We then assess the performance of MD relative to other desalination processes, including reverse osmosis and multi-effect distillation, comparing various metrics including energy efficiency, energy quality, and susceptibility to fouling. By analyzing the impact of membrane properties on the energy efficiency of an MD desalination system, we demonstrate the importance of maximizing porosity and optimizing thickness to minimize energy consumption. We also show how ineffective heat recovery and temperature polarization can limit the energetic performance of MD and how novel process variants seek to reduce these inefficiencies. Fouling, scaling, and wetting can have a significant detrimental impact on MD performance. We outline how novel membrane designs with special surface wettability and process-based fouling control strategies may bolster membrane and process robustness. Finally, we explore applications where MD may be able to outperform established desalination technologies, increasing water production without consuming large amounts of electrical or high-grade thermal energy. We conclude by discussing the outlook for MD desalination, highlighting challenges and key areas for future research and development.