Microbial ecology examines the diversity and activity of micro-organisms in Earth's biosphere. In the last 20 years, the application of genomics tools have revolutionized microbial ecological studies and drastically expanded our view on the previously underappreciated microbial world. This review first introduces the basic concepts in microbial ecology and the main genomics methods that have been used to examine natural microbial populations and communities. In the ensuing three specific sections, the applications of the genomics in microbial ecological research are highlighted. The first describes the widespread application of multilocus sequence typing and representational difference analysis in studying genetic variation within microbial species. Such investigations have identified that migration, horizontal gene transfer and recombination are common in natural microbial populations and that microbial strains can be highly variable in genome size and gene content. The second section highlights and summarizes the use of four specific genomics methods (phylogenetic analysis of ribosomal RNA, DNA–DNA re-association kinetics, metagenomics, and micro-arrays) in analysing the diversity and potential activity of microbial populations and communities from a variety of terrestrial and aquatic environments. Such analyses have identified many unexpected phylogenetic lineages in viruses, bacteria, archaea, and microbial eukaryotes. Functional analyses of environmental DNA also revealed highly prevalent, but previously unknown, metabolic processes in natural microbial communities. In the third section, the ecological implications of sequenced microbial genomes are briefly discussed. Comparative analyses of prokaryotic genomic sequences suggest the importance of ecology in determining microbial genome size and gene content. The significant variability in genome size and gene content among strains and species of prokaryotes indicate the highly fluid nature of prokaryotic genomes, a result consistent with those from multilocus sequence typing and representational difference analyses. The integration of various levels of ecological analyses coupled to the application and further development of high throughput technologies are accelerating the pace of discovery in microbial ecology.