The introduction of molecular genetic methods has caused confusion about the nature of microbial species. Environmental DNA extraction has indicated the existence of a vast diversity of genotypes, but how this relates to functional and phenotypic diversity has not been sufficiently explored. It has been implied that genetic distance per se correlates with phenotypic differentiation and thus reflects subtle (but undiscovered) adaptive fine-tuning to the environment, and that microbes may show biogeographic patterns at the genetic level. Here, we argue that no theoretically based species concept exists; species represent only the basic unit in the taxonomic hierarchy. The significance of naming species is that it organizes biological information. The reason why microbial species collectively represent large genetic differences is owing to huge absolute population sizes, absence of allopatric speciation and low extinction rates. Microbial phenotypes are, therefore, ancient in terms of the geological time-scale and have been maintained through stabilizing selection. These problems are discussed with special reference to eukaryotic micro-organisms.