Attachment of ubiquitin to proteins is a crucial step in many cellular regulatory mechanisms and contributes to numerous biological processes, including embryonic development, the cell cycle, growth control, and prevention of neurodegeneration. In these diverse regulatory settings, the most widespread mechanism of ubiquitin action is probably in the context of protein degradation. Polyubiquitin attachment targets many intracellular proteins for degradation by the proteasome, and (mono)ubiquitination is often required for down-regulating plasma membrane proteins by targeting them to the vacuole (lysosome). Ubiquitin-protein conjugates are highly dynamic structures. While an array of enzymes directs the conjugation of ubiquitin to substrates, there are also dozens of deubiquitinating enzymes (DUBs) that can reverse the process. Several lines of evidence indicate that DUBs are important regulators of the ubiquitin system. These enzymes are responsible for processing inactive ubiquitin precursors, proofreading ubiquitin-protein conjugates, removing ubiquitin from cellular adducts, and keeping the 26S proteasome free of inhibitory ubiquitin chains. The present review focuses on recent discoveries that have led to a better understanding the mechanisms and physiological roles of this diverse and still poorly understood group of enzymes. We also discuss briefly some of the proteases that act on ubiquitin-like protein (UBL) conjugates and compare them to DUBs.