This annual report issued by the Paul Scherrer Institute (PSI) in Switzerland takes a look at work done at the institute in the year 2008. The institute's findings around the topics of superconductivity and magnetism revealed using neutron scattering and muon spin resonance are reported on. The use of the high spatial resolution of synchrotron light at the Swiss Light Source (SLS) made it possible to create new nano-structures and reveal microscopic details of the functioning of photo-catalysts, fuel cells and bio-molecules. Work performed in the biology, energy, and environmental sciences area is reported on. The dating of glacier ice, the enhancement of the NMR sensitivity for potential medical diagnosis, the development of efficient SPECT tracers and the assessment of long-term safety of radioactive waste repositories are dealt with. On the operational side of the PSI accelerators, two world records are noted. New facilities such as the X-ray Free Electron Laser planned at the PSI are discussed. Further topics discussed include user facilities and technology transfer. Finally, a comprehensive list of publications completes the report.