A comprehensive review of the application status, key technical challenges, and future trends of fiber optic sensing technology applied in space propulsion systems is presented, exploring the feasibility and advantages of replacing traditional electronic sensors with fiber optic sensors in extreme space environments. The fundamental principles of fiber optic sensing technology are analyzed, especially focusing on the mathematical models and operational mechanisms of fiber Bragg grating (FBG) and Fabry-Pérot (F-P) cavity sensors. Furthermore, the latest experimental research and technical solutions are summarized in three typical application scenarios: dynamic strain measurement in cryogenic pipelines, design of intelligent propellant tanks, and temperature distribution monitoring of thermal protection materials in electric propulsion systems. Results demonstrate that packaged FBG sensors can effectively suppress spectral distortion at liquid nitrogen temperatures, enabling accurate strain measurement in small-diameter pipelines; fiber optic sensors embedded in carbon fiber composites can provide real-time structural health and leakage monitoring; and distributed optical frequency domain reflectometry (OFDR) systems can achieve millimeter-level spatial resolution for temperature field monitoring. The discussion identifies remaining technical bottlenecks such as environmental adaptability, packaging techniques, cross-sensitivity, and long-term stability. Future development should focus on integration with smart materials, quantum sensing, on-orbit maintenance, and data-driven decision-making to evolve fiber optic sensing from merely replacing traditional sensors towards enabling intelligent structural systems.