With the rapid development of aerospace engineering, nuclear power industry, marine engineering equipment and motor industry, especially the implementation of the national aerospace and marine strategy, the requirements are stricter on the reliability and service life of components in the complex service environment such as high corrosion and high alternating load. As an important evaluation criterion of component performance, surface integrity in machining has drawn more and more attention. Surface residual stress, as a major parameter of surface integrity, is closely related to fatigue life and functional performance of manufactured components. Therefore, it is necessary to investigate the formation mechanism of surface residual stress in machining. This paper introduced the definition of residual stress and its effects on material performance, compared the advantages and disadvantages of the neutron diffraction method and the X-ray diffraction method for residual stress determination, summarized the formation mechanism of surface residual stress in machining by experimental, predictive and FEM methods, analyzed effects of cutting parameters, tool geometry and material property on surface residual stress. The interrelationship between residual stress and fatigue life was summarized. Finally, the problems were explored in the formation mechanism of surface residual stress in machining and fatigue life evaluation.