Phase generated carrier modulation and demodulation algorithm is one of the key technologies for interfering measurement. The principle of modulation and demodulation of phase generated carrier is elaborated, the best numerical values of relevant parameters are illustrated, the two traditional phase generated carrier algorithms are introduced, the problem of limited dynamic range, companion amplitude modulation, carrier phase delay and corresponding solutions are described. Finally, the problem related to phase generated carrier modulation and demodulation algorithm is summarized and the trend of optical fibre sensor is forecasted.