We discuss the remaining obstacles to prove Smale's conjecture about the C¹-density of hyperbolicity among surface diffeomorphisms. Using a C¹-generic approach, we classify the possible pathologies that may obstruct the C¹-density of hyperbolicity. We show that there are essentially two types of obstruction: (i) persistence of infinitely many hyperbolic homoclinic classes and (ii) existence of a single homoclinic class which robustly exhibits homoclinic tangencies. In the course of our discussion, we obtain some related results about C¹-generic properties of surface diffeomorphisms involving homoclinic classes, chain-recurrence classes, and hyperbolicity. In particular, it is shown that on a connected surface the C¹-generic diffeomorphisms whose non-wandering sets have non-empty interior are the Anosov diffeomorphisms.