This paper overviews the current status of polarization bistable VCSELs and their applications to alloptical signal processing. We measured the bit error rate (BER) of flip-flop operations and obtained a good BER value of 1.56 × 10‒10. We also measured the BER of flip-flop operations with AND gate functionality. From the BER variation for the set pulse power, we found that fluctuations of the switching threshold and the phase at the combination of the data and the set pulses affected BER. We demonstrated all-optical 2-bit recognition and packet switching using two 1.55-μm polarization bistable VCSELs. Optical packets including 40-Gb/s NRZ pseudo-random bit-sequence payloads were successfully switched to the one of four designated ports, depending on the state of the two bits in the headers with 4-bit 500-Mb/s RZ format. We also report a high-index-contrast subwavelength grating VCSEL (HCG-VCSEL) that incorporates a polarization-independent HCG coupled with two orthogonal in-plane output waveguides.