The importance of wool in the textile industry has inspired extensive research into its structure since the 1960s. Over the past several years, however, the hair follicle has increased in significance as a system for studying developmental events and the process of terminal differentiation. The present chapter seeks to integrate the expanding literature and present a broad picture of what we know of the structure and formation of hair at the cellular and molecular level. We describe in detail the hair keratin proteins and their genes, their structure, function and regulation in the hair follicle, and also the major proteins and genes of the inner and outer root sheaths. We discuss hair follicle development with an emphasis on the factors involved and describe some hair genetic diseases and transgenic and gene knockout models because, in some cases, they stimulate natural mutations that are advancing our understanding of cellular interactions in the formation of hair.