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As the demand for electricity power increases rapidly while the fossil fuels decrease year by year, taking use of renewable resources seems very necessary. However, due to the discontinuous nature of the renewable resources and the hierarchical topology of the existing grid, the power quality and grid stability will deteriorate as more and more distributed generations (DGs) connected to the grid. It is a good idea to combine local utilization, local consumption, energy storage and DGs to form grid-friendly micro grid, these micro grids are then assembled to be an intelligent power system - Smart Grid. It can optimize the power flow and integrate power generation and consumption effectively. Most importantly, the power quality and grid stability can be improved greatly. This paper depicts how smart grid addresses the current issues of power system. It also figures out the key technologies and expectation of the smart grid.