The existence in eukaryotes of a fifth base, 5-methylcytosine, and of tissue-specific methylation patterns have been known for many years, but except for a general association with inactive genes and chromatin the exact function of this DNA modification has remained elusive. The different hypotheses regarding the role of DNA methylation in regulation of gene expression, chromatin structure, development, and diseases, including cancer are summarized, and the experimental evidence for them is discussed. Structural and functional properties of the eukaryotic DNA cytosine methyltransferase are also reviewed.