In cryptography key sequence generation is one of the important areas. Earlier pseudo random number generators were used as key sequence in stream cipher. After the evolution of chaotic systems, it was found that properties of chaotic systems are more superior to pseudo random number generators. In this context, we have tried to explore the basic theoretical background of chaotic systems, their types and properties in this paper. Along with chaotic systems, sequence generation using chaotic systems and the application of sequences in various image encryption methods is also discussed. Finally, a suitable key sequence generation using chaotic system is proposed.