The wide spread and high rate of gene exchange and loss in the prokaryotic world translate into "network genomics". The rates of gene gain and loss are comparable with the rate of point mutations but are substantially greater than the duplication rate. Thus, evolution of prokaryotes is primarily shaped by gene gain and loss. These processes are essential to prevent mutational meltdown of microbial populations by stopping Muller's ratchet and appear to trigger emergence of major novel clades by opening up new ecological niches. At least some bacteria and archaea seem to have evolved dedicated devices for gene transfer. Despite the dominance of gene gain and loss, evolution of genes is intrinsically tree-like. The significant coherence between the topologies of numerous gene trees, particularly those for (nearly) universal genes, is compatible with the concept of a statistical tree of life, which forms the framework for reconstruction of the evolutionary processes in the prokaryotic world.