A heat pump is an electrically powered, reversible-cycle refrigeration unit capable of both heating and cooling the interior of a structure.

The heat source is commonly either outside air (in the air-to-air type heat pump) or a closed loop of circulating water (in the water-to-air type heat pump). The former is the most popular type heat pump used for single family dwellings. The water-to-air heat pump system is most often found in multifamily structures. These are essentially central heating systems, with the heat pump replacing the central furnace or boiler as the heat generating unit.

Operating valves in the heat pump unit control the reversal of the refrigeration cycle. It removes heat from the interior of the structure and discharges it outside during hot weather, and supplies heat to the interior spaces during period of cold weather.

The basic components of a heat pump installation are: the compressor, the condenser, the evaporator, and a low-voltage thermostat.