Coined in 1966, the term cover version originally described a rival version of a tune recorded to compete with the recently released original version, e.g. Paul Williams' 1949 hit tune "The Hucklebuck" or Hank Williams' 1952 song "Jambalaya (On the Bayou)", both crossed over to the popular Hit Parade and had numerous hit versions. Prior to the mid-20th century the notion of an original version of a popular tune would, of course, have seemed slightly odd — the production of musical entertainment being seen essentially as a live event, even if one that was reproduced at home via a copy of the sheet music, learned by heart, or captured on a shellac recording disc. Popular musicians (and especially modern listeners) have now begun to use the word "cover" to refer to any remake of a previously recorded tune.

In previous generations, some artists made very successful careers out of presenting revivals or reworkings of once popular tunes, even out of doing contemporary cover versions of current hits. Musicians now play what they call "cover versions" (e.g. the reworking, updating or interpretation) of songs as a tribute to the original performer or group. Using familiar material (e.g. evergreen hits, standard tunes or classic recordings) is an important method in learning various styles of music. Most albums, or long playing records, up until the mid-1960s usually contained a large number of evergreens or standards to present a fuller range of the artist's abilities and style. Artists might also perform interpretations ("covers") of a favorite artist's hit tunes for the simple pleasure of playing a familiar song or collection of tunes. A cover band plays such "cover versions" exclusively.

In the contemporary world, there are broadly three types of entertainers who depend upon cover versions for their principal repertoire:

Tribute acts or bands are performers who make a living by recreating the music of one particular artist. Bands such as Björn Again, Dread Zeppelin, The Fab Faux, The Australian Pink Floyd Show and Iron Median are dedicated to playing the music of ABBA, Led Zeppelin, the Beatles, Pink Floyd and Iron Maiden respectively. There are also "tribute acts" that salute the Who, the Rolling Stones and many other classic rock acts. Most tribute bands attempt to recreate another band's music, but there are some such bands who introduce a twist. Dread Zeppelin's reggae takes on the Zeppelin catalog, and Beatallica creates heavy metal fusions of songs by the Beatles and Metallica.

Cover acts or bands are entertainers who perform a broad variety of crowd-pleasing material for audiences who enjoy the familiarity of hit songs. Such bands draw from Top 40 hits of different decades to provide a pleasurable nostalgic entertainment in bars, on cruise ships and at events such as weddings, family celebrations and corporate functions.

Revivalist artists or bands are performers who are inspired by an entire genre of music and who are dedicated to curating and recreating that genre and introducing it to younger audiences who have not experienced that music first hand. Unlike tribute bands and cover bands who rely primarily on audiences seeking a nostalgic experience, revivalist bands usually seek new young audiences for whom the music is fresh and has no nostalgic value. For example: Sha Na Na started in 1969 as a celebration of the doo-wop music of the 1950s, a genre of music that was not initially fashionable during the hippie counter-culture era. The Blues Brothers started in 1978 as a living salute to the blues, soul and R&B music of the 1950s and 1960s that was not in vogue by the late 70s. The Blues Brothers' creed was that they were "on a mission from God" as evangelists for blues and soul music. The Black Crowes formed in 1984, initially dedicated to reviving 1970s style blues-rock. They subsequently started writing their own material in the same vein.

Since the Copyright Act of 1909, in the United States there has been a right to record a version of someone else's tune, whether of music alone or of music and lyrics. A license can be specifically negotiated between representatives of the interpreting artist and the copyright holder, or recording of published tunes can fall under a mechanical license whereby the recording artist pays a standard royalty to the original author/copyright holder through an organization such as the Harry Fox Agency, and is safe under copyright law even if they do not have any permission from the original author. The mechanical license was introduced by Congress in order to head off an attempt by the Aeolian Company to monopolize the piano roll market.

While a composer cannot deny anyone a mechanical license for a new recorded version, he or she has the right to decide who will release the first recording of a song; Bob Dylan took advantage of this right when he refused his own record company the right to release a live recording of "Mr. Tambourine Man".

Live performances of copyrighted songs are typically arranged through performing rights organizations such as ASCAP or BMI.

From early in the 20th century it was common practice among phonograph record labels, if any company had a record that was a significant commercial success, that other record companies would have singers or musicians "cover" the "hit" tune by recording a version for their own label in hopes of cashing in on the tune's success. For example, Ain't She Sweet, was first popularized in 1927 by Eddie Cantor (on stage) and by Ben Bernie and Gene Austin (on record), was repopularized through popular recordings by Mr. Goon Bones & Mr. Ford and Pearl Bailey in 1949, and later still revived as 33 1/3 and 45 RPM records by the Beatles in 1964. Since there was little promotion or advertising involved in the earlier days of record production, other than at the local music hall or music store, when the average record buyer went out to purchase a new record, he usually asked for the tune, not the artist. In addition, distribution of records was highly localized in many cases. So, a quickly-recorded version of a hit song from another area by a locally popular artist could reach an audience before the version by the artist(s) who first introduced the tune in a particular format—the "original", "introductory" or "popularizing" artist—was widely available, and the highly competitive record companies were quick to take advantage of these facts.