Cholesteatoma is a non-neoplastic, keratinising lesion which has two forms: congenital and acquired. Congenital cholesteatoma develops behind a normal, intact tympanic membrane, whilst acquired cholesteatoma is associated with a defect in the tympanic membrane. The pathological substrate of cholesteatoma is keratinising stratified squamous epithelium, but the origin of this epidermal tissue in the middle ear is controversial. Here, we review the most relevant and recent evidence for the principal aetiopathogenic theories of both forms of cholesteatoma, in the light of recent otopathological findings. Congenital cholesteatoma is most plausibly explained by the persistence of fetal epidermoid formation. Conclusive 'proof' awaits the unambiguous demonstration of the metamorphosis of an epidermoid nidus into a lesion in vivo. Acquired cholesteatoma may develop by various mechanisms: immigration, basal hyperplasia, retraction pocket and/or trauma (iatrogenic or non-iatrogenic). However, squamous metaplasia of the normal cuboidal epithelium of the middle ear is a highly unlikely explanation. Chronic inflammation seems to play a fundamental role in multiple aetiopathogenic mechanisms of acquired cholesteatoma. Therefore early treatment of inflammatory conditions might reduce their sequelae, perhaps by preventing the development of hyperplastic papillary protrusions. Continued otopathological, cellular and molecular research would enhance our limited understanding of cholesteatoma and may lead to new therapeutic strategies for this erosive disease, which often defies surgical treatment.