Natural competence is widespread among bacterial species. The mechanism of DNA uptake in both gram-positive and gram-negative bacteria is reviewed. The transformation pathways are discussed, with attention to the fate of donor DNA as it is processed by the competent cell. The proteins involved in mediating various steps in these pathways are described, and models for the transformation mechanisms are presented. Uptake of DNA across the inner membrane is probably similar in gram-positive and gram-negative bacteria, and at least some of the required proteins are orthologs. The initial transformation steps differ, as expected, from the presence of an outer membrane only in the gram-negative organisms. The similarity of certain essential competence proteins to those required for the assembly of type-4 pili and for type-2 protein secretion is discussed. Finally several hypotheses for the biological role of transformation are presented and evaluated.