The accurate transfer of genetic material in germline cells during the formation of gametes is important for the continuity of the species. However, animal germline cells face challenges from transposons, which seek to spread themselves in the genome. This review focuses on studies in Drosophila melanogaster on how the genome protects itself from such a mutational burden via a class of gonad-specific small interfering RNAs, known as piRNAs (Piwi-interacting RNAs). In addition to silencing transposons, piRNAs also regulate other processes, such as chromosome segregation, mRNA degradation and germline differentiation. Recent studies revealed two modes of piRNA processing – primary processing and secondary processing (also known as ping-pong amplification). The primary processing pathway functions in both germline and somatic cells in the Drosophila ovaries by processing precursor piRNAs into 23–29 nt piRNAs. In contrast, the secondary processing pathway functions only in the germline cells where piRNAs are amplified in a feed-forward loop and require the Piwi-family proteins Aubergine and Argonaute3. Aubergine and Argonaute3 localize to a unique structure found in animal germline cells, the nuage, which has been proposed to function as a compartmentalized site for the ping-pong cycle. The nuage and the localized proteins are well-conserved, implying the importance of the piRNA amplification loop in animal germline cells. Nuage components include various types of proteins that are known to interact both physically and genetically, and therefore appear to be assembled in a sequential order to exert their function, resulting in a macromolecular RNA-protein complex dedicated to the silencing of transposons.