In advanced engineering applications, there has been an increasing demand for the service performance of materials under high-strain-rate conditions where a key phenomenon of adiabatic shear instability is inevitably involved. The presence of adiabatic shear instability is typically associated with large shear strains, high strain rates, and elevated temperatures. Significant plastic deformation that concentrates within a adiabatic shear band (ASB) often results in catastrophic failure, and it is necessary to avoid the occurrence of such a phenomenon in most areas. However, in certain areas, such as high-speed machining and self-sharpening projectile penetration, this phenomenon can be exploited. The thermal softening effect and microstructural softening effect are widely recognized as the foundational theories for the formation of ASB. Thus, elucidating various complex deformation mechanisms under thermomechanical coupling along with changes in temperatures in the shear instability process has become a focal point of research. This review highlights these two important aspects and examines the development of relevant theories and experimental results, identifying key challenges faced in this field of study. Furthermore, advancements in modern experimental characterization and computational technologies, which lead to a deeper understanding of the adiabatic shear instability phenomenon, have also been summarized.