DNA methylation involves the addition of a methyl group to the fifth carbon of the pyrimidine cytosine ring (5-methylcytosine, 5mC). 5mC is widespread in vertebrate genomes where it is predominantly found within CpG dinucleotides. In mammals, 5mC participates in long-term silencing processes such as X-chromosome inactivation, genomic imprinting, somatic silencing of germline genes, and silencing of repetitive DNA elements. The evidence for 5mC as a dynamic gene-regulatory mechanism is mostly limited to specific examples, and is far from being completely understood. Recent work from diverse model systems suggests that 5mC might not always act as a dominant repressive mechanism and that hypermethylated promoters and enhancers can be permissive to transcription in vivo and in vitro. In this review, we discuss the links between 5mC and enhancer activity, and evaluate the role of this biochemical mechanism in various biological contexts.