As the demand for electric power increases rapidly and the amount of fossil fuels decreases year by year, making use of renewable resources seem very necessary. However, due to the discontinuous nature of renewable resources and the hierarchical topology of existing grids, power quality and grid stability will deteriorate as more and more distributed generations (DGs) are connected to the grids. It is a good idea to combine local utilization, local consumption, energy storage and DGs to form a grid-friendly micro grid, these micro grids can then assembled into an intelligent power system - the smart Grid. It can optimize 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 the smart grid addresses the current issues of a power system. It also figures out the key technologies and expectations of the smart grid.