The physics of active galactic nuclei (AGN) and related objects is one
of the most actively pursued areas in astrophysics. Their large lumin
osities over the entire electromagnetic spectrum combined with extreme
ly short-time variability has stimulated a large number of astrophysic
ists to propose rather unconventional ideas. After a simplistic review
of the early work on AGN, a case is made for the important role of so
me of the nonlinear plasma processes in the generation of the nontherm
al continuum as well as its interaction with the plasma surrounding th
e central source in the form of accretion disks and emission line regi
ons. These plasma processes are fast, as they operate on characteristi
c time scales much shorter than the single particle processes do. Due
to their collective nature. the efficiencies of scattering, absorption
and emission increase many fold. In particular, it is shown how the p
arametric instabilities cause anomalous absorption and scattering and
in turn heat the plasma to much higher temperatures than could be achi
eved through particle collisions. A combination of the stimulated Rama
n and Compton scattering processes is shown to be able to account for
the major part of the spectrum of 3C273, as an example. An attempt is
made to address simultaneously the questions of acceleration of partic
les and their radiation through the concerted action of a sequence of
plasma processes. This review ends with some reflections on future res
earch directions.