Latent functionally thermal fluid (LFTF) is a novel heat transfer fluid in which the micro-particles of solid-liquid phase change material (PCM) with size of micron are suspended in a conventional single-phase heat transfer fluid. In contrast to conventional heat transfer fluids, LFTF with a smaller temperature difference between storing and releasing heat has much larger apparent specific heat and much higher storage capacity. Therefore, it has been suggested to serve as a dual-functional medium for thermal energy transport and/or storage. In this paper, our recent research on the flow characteristics and heat transfer enhancement of LFTF is introduced: a) Analyzing the convective heat transfer enhancement mechanisms of such two-phase heat transfer fluids; b) Developing two kinds of models, i.e., the effective specific heat model and the internal thermal source model; c) Discussing the influences of each factor on the heat transfer enhancement of such fluid flow in a circular tube; d) Testing the laminar rheological characteristics of a type of phase change micro-emulsions developed by the authors; e) Measuring the rheological characteristics and heat transfer enhancement of a novel kind of microencapsulated phase change suspensions developed by Hongkong Polytechnic University. Based on our research of LFTF, it has wide range of potential applications in the fields of HVAC, energy storage and transportation.