Expansion of wireless networks, demand for higher rates, limited resources, and channel multipath fading behavior have led to widespread research for better utilization of the available resources. Diversity techniques in time, frequency and space domains are the main tools for fading mitigation and even exploiting this phenomenon. Among various diversity schemes, spatial diversity has attracted higher interest in recent years. However, due to size and cost constraints, all nodes in wireless networks may not be equipped with multiple antennas. In such cases, cooperation among users provides the useful alternative to exploit the intrinsically existing space diversity in the system. Research has shown that next generation wireless systems must be cooperative, opportunistic, and distributed. Cooperative diversity, as the boundary between point to point and network communications, is a solid candidate for upcoming wireless networks. In this thesis, fundamentals and various aspects of cooperative diversity have been introduced. Capacity, detection and power allocation, in the two main protocols, namely Amplify-Forward and Decode-Forward, have been discussed in detail. Capacity bounds and ML detector structures have been derived from source cooperation and space-time transmission view points. A capacity based algorithm for power allocation has been developed for considering two users as information sources as a special case of power allocation in multi-carrier cooperative diversity. It is shown that water-filling is optimal in Decode-Forward and may be used iteratively for approaching the optimal power allocation in Amplify-Forward. Finally, recommendations for future works are also proposed.