The funiculars range from short urban lines to significant multi-section mountain railways. A funicular railway is distinguished from the similar incline elevator in that it has two vehicles that counterbalance one another rather than independently operated cars.

A funicular is essentially a hybrid between an elevator and a railroad. While it is often described as an "inclined elevator," there are key technical differences. Like an elevator, a funicular uses a cable to pull a car up a steep slope; however, like a train, the car runs on a fixed track with wheels. The defining characteristic of a true funicular is the use of two counterbalanced cars attached to the same cable. As one car descends, its weight helps pull the other car up, which makes the system extremely energy-efficient. An elevator, by contrast, moves vertically and usually relies on a counterweight hidden in a shaft rather than a second passenger car. In the United States, small versions for private homes or short public spans are sometimes legally classified as "inclined elevators," but the larger systems found in cities like Lisbon, Naples, or Pittsburgh are recognized as funicular railways.