Wnt signaling generates pattern in all animal embryos, from flies and worms to humans, and promotes the undifferentiated, proliferative state critical for stem cells in adult tissues. Inappropriate Wnt pathway activation is the major cause of colorectal cancers, a leading cause of cancer death in humans. Although this pathway has been studied extensively for years, large gaps remain in our understanding of how it switches on and off, and how its activation changes cellular behaviors. Much of what is known about the pathway comes from genetic studies in Drosophila, where a single Wnt molecule, encoded by wingless (wg), directs an array of cell-fate decisions similar to those made by the combined activities of all 19 Wnt family members in vertebrates. Although Wg specifies fate in many tissues, including the brain, limbs, and major organs, the fly embryonic epidermis has proven to be a very powerful system for dissecting pathway activity. It is a simple, accessible tissue, with a pattern that is highly sensitive to small changes in Wg pathway activity. This review discusses what we have learned about Wnt signaling from studying mutations that disrupt epidermal pattern in the fly embryo, highlights recent advances and controversies in the field, and sets these issues in the context of questions that remain about how this essential signaling pathway functions.