Modern use of the term designates two different classes of watercraft, sailing and power boats. Yachts differ from working ships mainly by their leisure purpose, and it was not until the rise of the steamboat and other types of powerboat that sailing vessels in general came to be perceived as luxury, or recreational vessels. Later the term came to encompass motor boats for primarily private pleasure purposes as well.

A few countries have a special flag worn by recreational boats or ships, which indicates the nationality of the ship. Although inspired by the national flag, the yacht ensign does not always correspond with the civil or merchant ensign of the state in question.