The subject of this paper is Stirling thermodynamic cycle, its characteristics, and comparisment of Stirling engine with other engines used for converting heat into work. First part of the paper is about historical development of Stirling engine, starting with invention and patent of first known Stirling engine, invention of a regenerator and further development of the engine. Work principle of first Stirling engine is described and some important versions of engine are mentioned. This is followed by some basic information about thermodynamic cycles in general, with special emphasis on Carnot and Stirling cycles. The method of calculating specific work, power, heat and efficiency for ideal Stirling cycle is described by using associated diagrams. The ideal cycle is compared to real cycle with description of losses occurring while the engine is running. The last part is focused on basic versions of engine, their advantages and disadvantages, and practical use of Stirling engine. Stirling engine is compared with internal combustion engines by the means of performance and efficiency.