Photochromic materials, as an adaptive smart material, have a wide range of applications in smart windows, photoelectric sensors, optical storage, etc. Oxygen-containing rare-earth metal hydrides (REHxOy) films, a new type of photochromic material, have attracted the attention of researchers for their efficient and reversible color-changing properties, simple and reproducible preparation methods, and fast darkening-bleaching times. This paper reviews the current status of research on the structural composition, color change mechanism, and property modulation of oxygen-containing rare-earth metal hydrides films. Exposure to visible and ultraviolet (UV) light triggers a decrease in the optical transmission of visible and infrared (IR) light. The photochromic mechanism can be categorized into four explanations: lattice contraction mechanism, oxygen exchange mechanism, local metal phase change, and hydrogen migration mechanism. Currently, performance can be tuned by controlling film morphology, designing chemical components, improving substrate adaptation, multilayer film structure design, etc. Finally, an outlook on research priorities after thin films is provided.