Pervasive systems must offer an open, extensible, and evolving portfolio of services which integrate sensor data from a diverse range of sources. The core challenge is to provide appropriate and consistent adaptive behaviours for these services in the face of huge volumes of sensor data exhibiting varying degrees of precision, accuracy and dynamism. Situation identification is an enabling technology that resolves noisy sensor data and abstracts it into higher-level concepts that are interesting to applications. We provide a comprehensive analysis of the nature and characteristics of situations, discuss the complexities of situation identification, and review the techniques that are most popularly used in modelling and inferring situations from sensor data. We compare and contrast these techniques, and conclude by identifying some of the open research opportunities in the area.