Osteocytes are derived from osteoblasts and make up over 90% of the cells in bone. However, the mechanisms that control the differentiation of osteoblasts into osteocytes embedded in bone matrix are not well understood. With the recent developments of transgenic models for manipulating gene expression in osteocytes and of transgenic mice carrying lineage reporters for osteoblasts and osteocytes, unprecedented new insights are becoming possible. In this article we review recent advances, such as comparative gene and protein expression studies, that are delineating the changes in gene and protein expression that accompany osteocyte differentiation. We also review recent studies in which time-lapse dynamic imaging approaches have been used to visualize osteoblast and osteocyte populations within bone. These approaches reveal the key role of cell motility in bone cell function and highlight the dynamic nature of mineralized tissues. Changes in motile properties of the cell may be key in the transition from osteoblast to osteocyte, as reflected in the altered expression of many molecules involved in cytoskeletal function.