Inosine is one of the most common post-transcriptional modifications. Since its discovery, it has been noted for its ability to contribute to non-Watson-Crick interactions within RNA. Rapidly accumulating evidence points to the widespread generation of inosine through hydrolytic deamination of adenosine to inosine by different classes of adenosine deaminases. Three naturally occurring methyl derivatives of inosine, i.e., 1-methylinosine, 2′-O-methylinosine and 1,2′-O-dimethylinosine are currently reported in RNA modification databases. These modifications are expected to lead to changes in the structure, folding, dynamics, stability and functions of RNA. The importance of the modifications is indicated by the strong conservation of the modifying enzymes across organisms. The structure, binding and catalytic mechanism of the adenosine deaminases have been well-studied, but the underlying mechanism of the catalytic reaction is not very clear yet. Here we extensively review the existing data on the occurrence, biogenesis and functions of inosine and its methyl derivatives in RNA. We also included the structural and thermodynamic aspects of these modifications in our review to provide a detailed and integrated discussion on the consequences of A-to-I editing in RNA and the contribution of different structural and thermodynamic studies in understanding its role in RNA. We also highlight the importance of further studies for a better understanding of the mechanisms of the different classes of deamination reactions. Further investigation of the structural and thermodynamic consequences and functions of these modifications in RNA should provide more useful information about their role in different diseases.