We use equivariant methods to define and study the orbifold K-theory of an orbifold X. Adapting techniques from equivariant K-theory, we construct a Chern character and exhibit a multiplicative decomposition for K ^* _orb (X)⊗ℚ, in particular showing that it is additively isomorphic to the orbifold cohomology of X. A number of examples are provided. We then use the theory of projective representations to define the notion of twisted orbifold K–theory in the presence of discrete torsion. An explicit expression for this is obtained in the case of a global quotient.