The aim of this study is to analyze lignocellulose based biofuels, their production and used biomass material. Comparing lignocellulosic biofuel with other biofuels is necessary for estimating its potential on the market. By reviewing and studying the required pre-treatment when processing lingocelullosic biomass, conclusions can be made about the economy and profitability of the process. In order to fully understand various pre-treatment processes, having an insight into the structure of the lignocellulosic biomass is unavoidable, therefore, this paper will cover the main components of which lignocellulosic biomass is composed; lignin, cellulose and hemicellulose. Given the fact that fermentation ethanol is usually the most commonly obtained biofuel from lignocellulosic biomass, an explanation of the fermentation process is provided as well as specifying certain properties of ethanol. A comparison of synthetic and fermentation ethanol, their production costs and return of investment allows a better understanding of lignocellulosic ethanol in terms of competitiveness on the market and profitability. Lignocellulosic ethanol will be more valued on the market once less pretreatments of lignocellulosic biomass are required resulting in a less expensive production process of lignocellulosic biomass.