The article reviews the basics and some of the applications of the three-dimensional finite-difference time-domain (FDTD) technique for simulation and modelling of light scattering by biological cells in an absorptive extra-cellular medium. The emphasis is on the details of the single particle light scattering version of FDTD approach including a comprehensive consideration of the far field transformation algorithm and the Uni-axial Perfectly Matched Layer (UPML) absorbing boundary conditions. As a demonstration, we consider two simulation scenarios. First, we consider the effect of absorption of the extra-cellular medium on the light scattering patterns from biological cells. The single cell scattering properties including scattering phase functions, extinction and absorption efficiencies are derived based on the volume integration of the internal fields. The simulation results show that absorption in the extra-cellular medium modify the light scattering patterns and need to be carefully taken into account. Second, we present some initial results on the application of the FDTD technique to study the nature of the optical clearing effect - the increased light transmission through biological cells due to the matching of the refractive indices of some of their components to that of the extra-cellular medium. We show that the FDTD approach has a significant potential for studying the control of biological tissue optical properties by external administration of chemical agents. The implications of the FDTD approach for biomedical diagnostics research is also discussed.