At the outer surface of the body, the epidermis of skin forms a protective barrier to keep microorganisms out and essential body fluids in. This barrier is composed of one main cell type, the keratinocyte, which undergoes a precisely defined program of differentiation to produce a durable and renewable integument. The delicate balance between differentiation and proliferation is maintained by regulatory molecules and growth factors. In basal and squamous cell carcinomas of the skin, the balance between growth and differentiation goes awry, although the detailed pathways underlying these cancers remain to be elucidated. Transgenic mice provide the opportunity to precisely perturb growth factors in the skin in the context of a whole organism, leading to valuable insight into both appropriate and deranged growth. This article will review the biology and biochemistry of epidermal growth and differentiation, with emphasis on basal and squamous cell carcinomas and hyperproliferative diseases of the skin, and how recent transgenic research has been utilized to take a penetrating look into these issues.