The ribonucleoprotein (RNP) enzyme telomerase synthesizes telomere DNA and maintains telomere length in eukaryotic cells. This review describes recent findings that provide new understanding, of the functions of telomeres and telomerase. Telomerase has an essential RNA moiety in which a short sequence acts as the template for synthesis of telomeric DNA. Recent results show that, besides acting as a template, the telomerase RNA plays essential roles in the enzymatic functions of telomerase that are as critical as those provided by the protein reverse transcriptase subunit of telomerase. Analysis of telomerase RNA mutants in yeast has provided evidence that telomerase is an oligomeric/dimeric enzyme containing at least two telomerase RNA molecules and two enzyme-active sites. Recent data suggest that this telomerase RNP also plays a critical role in capping short telomeres. Thus, the length of a telomere is only one determinant of whether it is sufficiently long to function as a cap, stabilizing the chromosome end. Several lines of evidence converge on the notion that for telomere length regulation and other telomere functions, the very few last repeats at the tip of the telomere are the most crucial.