Vessels are formed during embryonic development through three distinct processes. Angiogenesis and arteriogenesis involve the remodeling of established capillary networks and arterioles, while vasculogenesis involves the differentiation of mesodermal progenitor cells called angioblasts into mature endothelial cells. Until recently, postnatal vessel development was felt to occur exclusively through angiogenesis or arteriogenesis. However, recent studies using experimental tumor and ischemia models have raised controversy regarding whether vasculogenesis occurs in postnatal vessel development, with some studies suggesting the possibility and others refuting it. Here, we summarize the process of embryonic vessel development and review studies investigating the role of postnatal vasculogenesis in vessel formation in adult ischemia and tumors. We then focus on studies in which wild-type and genetically modified vascular progenitor cells have been investigated as possible cellular therapies for tumors or ischemia. We also take note of key issues that will need to be understood about the biology of vasculogenesis before cellular therapies utilizing vascular progenitor cells can be finally taken from the bench to the bedside.