The microsporidia are obligate intracellular parasites which have diverse life cycles involving both horizontal and vertical transmission and parasitise a wide range of vertebrate and invertebrate hosts. In this paper we consider the life cycles and diversity of the microsporidia. We focus in particular on the relationship between parasite transmission and virulence and its implications for host-parasite coevolution. The use of horizontal and vertical routes of transmission varies between species and there is a strong link between transmission and virulence. Horizontal transmission is characterised by a high parasite burden and associated pathogenicity. In contrast, vertical transmission is characterised by low virulence, which has led to under-reporting of this important transmission route. Vertically transmitted microsporidia may also cause male killing or feminisation of their host, with implications for host population sex ratio and stability. Phylogenetic analysis shows that vertical transmission occurs in diverse branches of the Microspora. We find that there is evidence for vertical transmission in both vertebrate and invertebrate hosts and conclude that it is a common or possibly even ubiquitous transmission route within this phylum.