Future missions for underwater systems may require rapid communication utilising high data transfer rates. Optical communication can provide this capability, being either based on optical fibres or transmission directly through the media. Both are highly covert, directional and do not require frequency allocation as radio transmitters. This report describes particularly a method for wireless optical communication using modulated retro-reflectors. This technology has the potential to provide data rates in the megabits per second range in the future. Modulated retro-reflectors denote devices which reflect light exactly in the incident direction and encode a modulation upon the reflected laser beam. Hence, an optical communication link can be established with the illuminating part without a light source. Comparably small, simple and cheap devices can be used for optical communication links from unstable platforms such as buoys. We describe in this report briefly the basic idea, the achievable performance, potential applications of the technology, the current status and our recommendation for future work within this field.