Elements of the vertebrate skeleton are initiated as cell condensations, collectively termed the 'membranous skeleton' whether cartilages or bones by Grüneberg (1963). Condensations, which were identified as the basic cellular units in a recent model of morphological change in development and evolution (Atchley and Hall 1991) are reviewed in this paper. Condensations are initiated either by increased mitotic activity or by aggregation of cells towards a centre. Prechondrogenic (limb bud) and preosteogenic (scleral ossicle) condensations are discussed and contrasted. Both types of skeletogenic condensations arise following epithelial-mesenchymal interactions; condensations are identified as the first cellular product of such tissue interactions. Molecular characteristics of condensations are discussed, including peanut agglutinin lectin, which is used to visualize prechondrogenic condensations, and hyaluronan, hyaladherins, heparan sulphate proteoglycan, chondroitin sulphate proteoglycan, versican, tenascin, syndecan, N-CAM, alkaline phosphatase, retinoic acid and homeo-box-containing genes. The importance for the initiation of chondrogenesis or osteogenesis of upper and lower limits to condensation size and the numbers of cells in a condensation are discussed, as illustrated by in vitro studies and by mutant embryos, including Talpid3 in the chick and Brachypod, Congenital hydrocephalus and Phocomelia in the mouse. Evidence that genes specific to the skeletal type are selectively activated at condensation is discussed, as is a recent model involving TGF-beta and fibronectin in condensation formation. Condensations emerge as a pivotal stage in initiation of the vertebrate skeleton in embryonic development and in the modification of skeletal morphology during evolution.