Recent genetic studies have provided overwhelming evidence of the involvement of microglia-related molecular networks in the pathophysiology of Alzheimer's disease (AD). However, the precise mechanisms by which microglia alter the course of AD neuropathology remain poorly understood. Here we discuss current evidence of the neuroprotective functions of microglia with a focus on optical imaging studies that have revealed a role of these cells in the encapsulation of amyloid deposits ("microglia barrier"). This barrier modulates the degree of plaque compaction, amyloid fibril surface area, and insulation from adjacent axons thereby reducing neurotoxicity. We discuss findings implicating genetic variants of the microglia receptor, triggering receptor expressed on myeloid cells 2, in the increased risk of late onset AD. We provide evidence that increased AD risk may be at least partly mediated by deficient microglia polarization toward amyloid deposits, resulting in ineffective plaque encapsulation and reduced plaque compaction, which is associated with worsened axonal pathology. Finally, we propose possible avenues for therapeutic targeting of plaque-associated microglia with the goal of enhancing the microglia barrier and potentially reducing disease progression