Lipopeptides constitute a structurally diverse group of metabolites produced by various bacterial and fungal genera. In the past decades, research on lipopeptides has been fueled by their antimicrobial, antitumour, immunosuppressant and surfactant activities. However, the natural functions of lipopeptides in the lifestyles of the producing microorganisms have received considerably less attention. The substantial structural diversity of lipopeptides suggests that these metabolites have different natural roles, some of which may be unique to the biology of the producing organism. This review gives a detailed overview of the versatile functions of lipopeptides in the biology of Pseudomonas and Bacillus species, and highlights their role in competitive interactions with coexisting organisms, including bacteria, fungi, oomycetes, protozoa, nematodes and plants. Their functions in cell motility, leading to colonization of novel habitats, and in the formation and development of highly structured biofilms are discussed in detail. Finally, this review provides an update on lipopeptide detection and discovery as well as on novel regulatory mechanisms and genes involved in lipopeptide biosynthesis in these two bacterial genera.