Dye-decolorizing peroxidases (DyPs; EC 1.11.1.19) are heme enzymes that comprise a family of the dimeric α+β barrel structural superfamily of proteins. The first DyP, identified relatively recently in the fungus Bjerkandera adusta, was characterized for its ability to catalyze the decolorization of anthraquinone-based industrial dyes. These enzymes are now known to be present in all three domains of life, but do not appear to occur in plants or animals. They are involved in a range of physiological processes, although in many cases their roles remain unknown. This has not prevented the development of their biocatalytic potential, which includes the transformation of lignin. This review highlights the functional diversity of DyPs in the light of phylogenetic, structural and biochemical data. The phylogenetic analysis reveals the existence of at least five classes of DyPs. Their potential physiological roles are discussed based in part on synteny analyses. Finally, the considerable biotechnological potential of DyPs is summarized.