Many marine sponges harbour dense and diverse microbial communities of considerable ecological and biotechnological importance. While the past decade has seen tremendous advances in our understanding of the phylogenetic diversity of sponge-associated microorganisms (more than 25 bacterial phyla have now been reported from sponges), it is only in the past 3-4 years that the in situ activity and function of these microbes has become a major research focus. Already the rewards of this new emphasis are evident, with genomics and experimental approaches yielding novel insights into symbiont function. Key steps in the nitrogen cycle [denitrification, anaerobic ammonium oxidation (Anammox)] have recently been demonstrated in sponges for the first time, with diverse bacteria - including the sponge-associated candidate phylum 'Poribacteria'- being implicated in these processes. In this minireview we examine recent major developments in the microbiology of sponges, and identify several research areas (e.g. biology of viruses in sponges, effects of environmental stress) that we believe are deserving of increased attention.