This literature review examines the impact of interactive videos in online learning environments. The analysis of current research demonstrates that interactive videos—which incorporate elements like embedded questions and clickable hotspots—significantly improve student engagement and learning outcomes compared to traditional linear videos. While the benefits are well-documented, including higher test scores and increased student motivation, challenges remain in technical implementation and faculty training. The review synthesizes best practices and identifies gaps in current research to guide educators in effective implementation of interactive video technology.