Chronic infection with hepatitis C virus (HCV) is an important contributor to the global incidence of liver diseases, including liver cirrhosis and hepatocellular carcinoma. Although common for single-stranded RNA viruses, HCV displays a remarkable high level of genetic diversity, produced primarily by the error-prone viral polymerase and host immune pressure. The high genetic heterogeneity of HCV has led to the evolution of several distinct genotypes and subtypes, with important consequences for pathogenesis, and clinical outcomes. Genetic variability constitutes an evasion mechanism against immune suppression, allowing the virus to evolve epitope escape mutants that avoid immune recognition. Thus, heterogeneity and variability of the HCV genome represent a great hindrance for the development of vaccines against HCV. In addition, the high genetic plasticity of HCV allows the virus to rapidly develop antiviral resistance mutations, leading to treatment failure and potentially representing a major hindrance for the cure of chronic HCV patients. In this chapter, we will present the central role that genetic diversity has in the viral life cycle and epidemiology of HCV. Incorporation errors and recombination, both the result of HCV polymerase activity, represent the main mechanisms of HCV evolution. The molecular details of both mechanisms have been only partially clarified and will be presented in the following sections. Finally, we will discuss the major consequences of HCV genetic diversity, namely its capacity to rapidly evolve antiviral and immunological escape variants that represent an important limitation for clearance of acute HCV, for treatment of chronic hepatitis C and for broadly protective vaccines.