Different model systems have, over the years, contributed to our current understanding of the molecular mechanisms underpinning the various types of interaction between bacteria and their animal hosts. The genus Photorhabdus comprises Gram-negative insect pathogenic bacteria that are normally found as symbionts that colonize the gut of the infective juvenile stage of soil-dwelling nematodes from the family Heterorhabditis. The nematodes infect susceptible insects and release the bacteria into the insect haemolymph where the bacteria grow, resulting in the death of the insect. At this stage the nematodes feed on the bacterial biomass and, following several rounds of reproduction, the nematodes develop into infective juveniles that leave the insect cadaver in search of new hosts. Therefore Photorhabdus has three distinct and obligate roles to play during this life-cycle: (1) Photorhabdus must kill the insect host; (2) Photorhabdus must be capable of supporting nematode growth and development; and (3) Photorhabdus must be able to colonize the gut of the next generation of infective juveniles before they leave the insect cadaver. In this review I will discuss how genetic analysis has identified key genes involved in mediating, and regulating, the interaction between Photorhabdus and each of its invertebrate hosts. These studies have resulted in the characterization of several new families of toxins and a novel inter-kingdom signalling molecule and have also uncovered an important role for phase variation in the regulation of these different roles.