Percussion drilling technology was considered many years ago as one of the best approaches for hard rock drilling. Unfortunately the efficiency of most hydraulic hammer (HH) designs was very low (8% maximum), so they were successfully used in shallow boreholes only. Thirty years of research and field drilling experience with HH application in Former Soviet Union (FSU) countries led to the development of a new generation of HH designs with a proven efficiency of 40%. That advance achieved good operational results in hard rock at depths up to 2,000 m and more. The most recent research has shown that there are opportunities to increase HH efficiency up to 70%. This paper presents HH basic design principles and operational features. The advantages of HH technology for coiled-tubing drilling is shown on the basis of test results recently conducted in the US