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We correct mistakes in a 2004 paper by the second author and report on recent new developments which settle cases left open in that paper.

We classify all possible extensions of a valuation from a ground field $K$ to a rational function field in one or several variables over $K$. We determine which value groups and residue fields can appear, and we show how to construct extensions having these value groups and residue fields. In particular, we give several constructions of extensions whose corresponding value group and residue field extensions are not finitely generated. In the case of a rational function field $K(x)$ in one variable, we consider the relative algebraic closure of $K$ in the henselization of $K(x)$ with respect to the given extension, and we show that this can be any countably generated separable-algebraic extension of $K$. In the "tame case", we show how to determine this relative algebraic closure. Finally, we apply our methods to power series fields and the $p$-adics., Comment: 41 pages