Transformation occurs naturally in some species of bacteria, but it can also be affected by artificial means in other cells. For transformation to happen, bacteria must be in a state of competence, which might occur as a time-limited response to environmental conditions such as starvation and cell density. Transformation is one of three processes by which exogenous genetic material may be introduced into a bacterial cell; the other two being conjugation (transfer of genetic material between two bacterial cells in direct contact), and transduction (injection of foreign DNA by a bacteriophage virus into the host bacterium).

"Transformation" may also be used to describe the insertion of new genetic material into nonbacterial cells, including animal and plant cells; however, because "transformation" has a special meaning in relation to animal cells, indicating progression to a cancerous state, the term should be avoided for animal cells when describing introduction of exogenous genetic material. Introduction of foreign DNA into eukaryotic cells is often called "transfection".

About 1% of bacterial species are capable of naturally taking up DNA under laboratory conditions; more may be able to take it up in their natural environments. DNA material can be transferred between different strains of bacteria in a process that is called horizontal gene transfer.

Some species, upon cell death, release their DNA to be taken up by other cells; however, transformation works best with DNA from closely-related species. These naturally-competent bacteria carry sets of genes that provide the protein machinery to bring DNA across the cell membrane(s). The transport of the exogeneous DNA into the cells may require proteins that are involved in the assembly of type IV pili and type II secretion system, as well as DNA translocase complex at the cytoplasmic membrane.