There is no doubt that the recent advances in nanotechnology have made it possible to realize a great variety of new sensors with signal transduction mechanisms utilizing physical phenomena at the nanoscale. Some examples are conductivity measurements in nanowires, deflection of cantilevers and spectroscopy of plasmonic nanoparticles. The fact that these techniques are based on the special properties of nanostructural entities provides for extreme sensor miniaturization since a single structural unit often can be used as transducer. This review discusses the advantages and problems with such small sensors, with focus on biosensing applications and label-free real-time analysis of liquid samples. Many aspects of sensor design are considered, such as thermodynamic and diffusion aspects on binding kinetics as well as multiplexing and noise issues. Still, all issues discussed are generic in the sense that the conclusions apply to practically all types of surface sensitive techniques. As a counterweight to the current research trend, it is argued that in many real world applications, better performance is achieved if the active sensor is larger than that in typical nanosensors. Although there are certain specific sensing applications where nanoscale transducers are necessary, it is argued herein that this represents a relatively rare situation. Instead, it is suggested that sensing on the microscale often offers a good compromise between utilizing some possible advantages of miniaturization while avoiding the complications. This means that ensemble measurements on multiple nanoscale sensors are preferable instead of utilizing a single transducer entity.