In plants and animals, gene expression can be altered by changes that do not alter the sequence of nucleotides in DNA but rather modify the chemical structure of either the DNA or the histones that interact with the DNA. These so-called epigenetic modifications are not transient, but persist through cell divisions. Rapidly advancing technologies, such as next-generation DNA sequencing, have dramatically increased our ability to survey epigenetic markers throughout an entire genome. These techniques are revealing in great detail that the many forms and stages of cancer are characterized by a massive number of epigenetic changes. Interpreting such epigenetic marks in cell differentiation and in carcinogenesis is computationally challenging. We review several examples of epigenetic data analysis and discuss the need for computational methods that will enable us to learn from the data the relationships between different kinds of histone modifications and DNA methylation.