This review critically examines recent advances in algal biofuel research, focusing on the molecular and biochemical mechanisms of lipid biosynthesis and the application of metabolic engineering strategies to reprogram carbon flux. It further explores the integration of algal systems into sustainable biorefinery platforms, contextualizing algal bioenergy within global decarbonization frameworks and circular bioeconomy models. The review syntheses key findings from the literature, highlighting that microalgae exhibit superior photosynthetic efficiency and high areal productivity compared to terrestrial crops, while simultaneously sequestering CO₂. It discusses how genetic modifications targeting key enzymes (e.g., ACCase, DGAT, malic enzyme) have shown promise in enhancing triacylglycerol (TAG) accumulation, alongside the impact of CRISPR/Cas9-based genome editing and systems biology approaches on accelerating strain optimization. Beyond biodiesel, the valorization of algal biomass for bioethanol, biohydrogen, and high-value co-products is reviewed. Furthermore, the environmental benefits confirmed by Life Cycle Assessment (LCA) studies, particularly when coupled with wastewater remediation and flue-gas CO₂ utilization, are discussed. Nevertheless, techno-economic analyses highlighting persistent barriers, including energy-intensive harvesting, nutrient supply, and scalability constraints of different cultivation systems, are presented. The review concludes that algal biofuels represent a frontier in renewable energy science, bridging molecular biology, metabolic engineering, and process intensification. Despite current cost prohibitive challenges, the convergence of synthetic biology, bioprocess optimization, and integrated biorefineries positions algal biofuels as a viable contributor to carbon-neutral and potentially carbon-negative energy systems. Future breakthroughs in omics-driven metabolic modeling and closed-loop circular biotechnologies are identified as pivotal for their global deployment.