The ability of pneumococci to take up naked DNA from the environment and permanently incorporate the DNA into their genome by recombination has been exploited as a valuable research tool for 80 years. From being viewed as a marginal phenomenon, it has become increasingly clear that horizontal gene transfer by natural transformation is a powerful mechanism for generating genetic diversity, and that it has the potential to cause severe problems for future treatment of pneumococcal disease. This process constitutes a highly efficient mechanism for spreading beta-lactam resistance determinants between streptococcal strains and species, and also threatens to undermine the effect of pneumococcal vaccines. Fortunately, great progress has been made during recent decades to elucidate the mechanism behind natural transformation at a molecular level. Increased insight into these matters will be important for future development of therapeutic strategies and countermeasures aimed at reducing the spread of hazardous traits. In this review, we focus on recent developments in our understanding of competence regulation, DNA acquisition and the role of natural transformation in the dissemination of virulence and beta-lactam resistance determinants.