I will review the X-ray spectral properties of black hole and neutron star binary systems. The large amount of data from the Rossi X-ray Timing Explorer (RXTE), spanning over six years, allows us to analyse statistical properties of these compact objects. With increasing accretion rate they trace out characteristic patterns in the X-ray colour-colour diagrams. In particular, the evolution of black holes in these diagrams is very different from evolution of neutron stars. I will show this is due to the presence of the solid surface in neutron stars and lack of it in black holes. There is a type of X-ray spectrum, which is only seen in black holes, which seems to be a good diagnostic of the event horizon.