DNA methylation plays an important role in gene regulation in animals. However, the evolution and function of DNA methylation has only recently emerged as the subject of widespread study in insects. In this review we profile the known distribution of DNA methylation systems across insect taxa and synthesize functional inferences from studies of DNA methylation in insects and vertebrates. Unlike vertebrate genomes, which tend to be globally methylated, DNA methylation is primarily targeted to genes in insects. Nevertheless, mounting evidence suggests that a specialized role exists for genic methylation in the regulation of transcription, and possibly mRNA splicing, in both insects and mammals. Investigations in several insect taxa further reveal that DNA methylation is preferentially targeted to ubiquitously expressed genes and may play a key role in the regulation of phenotypic plasticity. We suggest that insects are particularly amenable to advancing our understanding of the biological functions of DNA methylation, because insects are evolutionarily diverse, display several lineage-specific losses of DNA methylation and possess tractable patterns of DNA methylation in moderately sized genomes.