Before the first commercial neon lights became available in 1910, sign owners were limited to the indirect illumination of floodlights or 'chaser' incandescent bulbs placed around their sign's perimeter. Once it became possible to created letters and symbols from sealed glass tubes, neon signs became the newest and shiniest part of the outdoor advertising landscape. The first neon signs in the United States formed the word 'Packard' at a car dealership in California. The novelty of neon tubes probably attracted more visitors to the lot than the product itself and quickly proved their usefulness. Potential customers could easily spot these promotional signs, even from distant roadways or in total darkness.

Different from LED sign, neon signs are formed from glass tubes bent into specified shapes by trained glassworkers. Special machines draw out all of the air from the tubes and replace it with noble gases such as neon, argon or helium. If argon is used, a small amount of mercury may be added to create additional vapors. Pastel colors are created by dusting the inside of the tube with different phosphors, much like the whitish coating found inside standard fluorescent light box. Neon glows red, argon glows blue or purple without phosphors, and helium may glow yellow.

In order to form neon signs, these tubes must be sealed with glass plugs containing thin electrical wires. Individual letters and other designs are then attached to each other and ultimately to a power source. Many neon signs require 10,000 to 15,000 volts of electricity to cause trapped gases to glow, but the amperage is still relatively low and safe for humans. Because neon tubes are easily damaged, however, many sign owners still place their signs out of reach of children.

Neon signs can be designed to be static displays, such as the ubiquitous Open/Closed signs in restaurants, or they can be animated. A series of different neon lights can be switched on and off to give the illusion of motion. Back in the Golden Era of neon signs, from the 1940s through the 1960s, advertisers and promoters used animation techniques to draw customers into casinos and theaters.

Advances in electronics have almost eliminated the need for true neon signs, but a number of business owners still prefer the glowing effect and nostalgic value of neon. The craft of glass bending is still practiced by a few specialists and repairs to broken neon signs can still be made, but the expense for elaborate designs can be prohibitive. It is not unusual to find electronic signs which use the same intense pastel colors as the neon signs of old, but their illumination sources may be incandescent bulbs or fluorescent lights surrounded by color filters.