In China, over 1.43×107 tons of dewatered sewage sludge, with 80% water content, were generated from wastewater treatment plants in 2007. About 60% of the COD removed during the wastewater treatment process becomes concentrated as sludge. Traditional disposal methods used by municipal solid waste treatment facilities, such as landfills, composting, or incineration, are unsuitable for sludge disposal because of its high water content. Disposal of sludge has therefore become a major focus of current environmental protection policies. The present status of sludge treatment and disposal methodology is introduced in this paper. Decreasing the energy consumption of sludge dewatering from 80% to 50% has been a key issue for safe and economic sludge disposal. In an analysis of sludge water distribution, thermal drying and hydrothermal conditioning processes are compared. Although thermal drying could result in an almost dry sludge, the energy consumption needed for this process is extremely high. In comparison, hydrothermal technology could achieve dewatered sewage sludge with a 50%–60% water content, which is suitable for composting, incineration, or landfill. The energy consumption of hydrothermal technology is lower than that required for thermal drying.