Transformation is the process of import and inheritable integration of DNA from the environment. As such, it is believed to be a major driving force for evolution. Competence for transformation is widespread among bacterial species. Recent findings draw a picture of a conserved molecular machine that binds DNA at the cell surface and subsequently transports it through the cell envelope. Within the cytoplasm the DNA is coated by proteins that mediate recombination or self-annealing. The regulatory mechanisms and environmental signals affecting competence are very diverse between different bacterial species. Competence in Bacillus subtilis has become a paradigm for stochastic determination of cell-fate. Quantitative analysis at the single cell level in conjunction with mathematical modelling allowed understanding of induction and decline of competence at the systems level. Currently, the picture is emerging of stochastic differentiation as a fitness trade-off in fluctuating environments.