Polarization-division-multiplexed (PDM) is one of the enabling techniques for future high-performance optical communication systems in terms of doubling system capacity directly. As two data channels carry the same wavelength while with orthogonal polarization states and most signal processing schemes are nonlinear-effect based, conventional all-optical signal processing approaches are facing great challenges. We review different schemes for signal processing in PDM systems using different nonlinear elements, especially highly-nonlinear fiber (HNLF). Recent experimental demonstration results at 10-Gb/s are discussed with various functionalities such as all-optical signal regeneration, wavelength conversion, mitigating channel degrading effects and so on.