Rhabdomyosarcoma (RMS) is the most common soft tissue sarcoma of childhood and adolescence. The predominant histologic variants of this disease are termed embryonal (eRMS) and alveolar (aRMS), based on their appearance under light microscopy. Of the two, aRMS is associated with an more aggressive disease pattern and a higher mortality, mandating a better understanding of this cancer at the molecular level. The PAX3-FOXO1 fusion gene, resulting from the stable reciprocal translocation of chromosomes 2 and 13, is a signature genetic change found only in aRMS, and thought to be responsible at least in part for its malignant phenotype. This review will discuss the clinical significance of the PAX3-FOXO1 fusion gene, the pertinent historical and current models used to study its oncogenic contributions, the transcriptional targets that are thought to mediate these contributions, and the cellular mechanisms impacted by PAX3-FOXO1 that ultimately lead to aRMS.