With the help of augmented reality (AR) and virtual reality (VR) systems, users can receive information and connect with each other via near-eye displays (NEDs). However, several challenges need to be addressed, and the optics are the major bottlenecks. Users wearing current NEDs typically suffer from vergence-accommodation conflict (VAC). Furthermore, people with refractive errors need a pair of prescription lenses to clearly see the virtual image and/or environment. Hence, VAC-free AR/VR systems with vision correction functions should be developed. Furthermore, the AR/VR systems must be designed with slim form factors. Liquid crystal (LC) optical elements with a thin form factor have been demonstrated for light modulation in versatile optical systems; thus, LC-based solutions have been proposed for AR/VR systems in the past decade. Herein, we provide a comprehensive review on the existing literature on LC-based optical systems and suggest possible solutions to realize a better NED system. This review provides an overview of the state-of-the-art progress of LC optics in AR and VR systems. It focuses on the fundamental optics of NEDs, origins of VAC and current LC-based solutions, LC lenses for vision correction function, and the guidelines for solving the two aforementioned challenges using LC lenses.