The extensive diversity of membrane lipids is rarely appreciated by cell and molecular biologists. Although most researchers are familiar with the three main classes of lipids in animal cell membranes, few realize the enormous combinatorial structural diversity that exists within each lipid class, a diversity that enables functional specialization of lipids. In this brief review, we focus on one class of membrane lipids, the sphingolipids, which until not long ago were thought by many to be little more than structural components of biological membranes. Recent studies have placed sphingolipids—including ceramide, sphingosine and sphingosine‐1‐phosphate—at the centre of a number of important biological processes, specifically in signal transduction pathways, in which their levels change in a highly regulated temporal and spatial manner. We outline exciting progress in the biochemistry and cell biology of sphingolipids and focus on their functional diversity. This should set the conceptual and experimental framework that will eventually lead to a fully integrated and comprehensive model of the functions of specific sphingolipids in regulating defined aspects of cell physiology.