Culture-independent, high-throughput sequencing techniques have enabled us to characterize the complex communities of resident microorgansims living in and on our skin. These microbes contribute to cutaneous health, by providing colonization resistance and regulating immunity, however disruption of skin microbiota has been linked to diseases, like acne and atopic dermatitis. While the microbiome is a promising therapeutic target, we do not fully understand the mechanisms underlying the microbial contributions to disease pathogenesis. It is therefore crucial to develop comprehensive knowledge of both the structure of the skin microbiome and the host functions it stimulates. Here, we present a critical analysis of the composition and metabolic potential of healthy human skin microbiota and how these communities modulate the gene expression of their hosts. In the first section, we optimize methodologies for skin microbiome studies and utilize the best approaches to characterize the bacteria, viruses, and fungi colonizing healthy skin. We applied amplification and sequencing of two hyper variable regions of the 16S rRNA gene, in addition to whole metagenomic shotgun sequencing, to cutaneous swab samples from a healthy cohort. We demonstrate that shotgun sequencing yields the most accurate profiles of the skin microbiome, but that sequencing of the V1-V3 region of the 16S rRNA gene is a suitable, cost-effective alternative. We also reveal significant taxonomic, functional, and temporal diversity of skin microbial communities and highlight potential multi-kingdom interactions between skin phages and their bacterial hosts. The second section focuses on the response of the cutaneous transcriptome to colonization by resident microflora. We used RNA sequencing to compare gene expression in skin collected from sterile, germ-free mice, and mice conventionally raised in the presence of microbiota. We find that the skin microbiome primes the cutaneous immune system, through increases in both frequency of innate immune cell populations and expression of immune response genes. We also reveal that the skin microbiome transcriptionally regulates epidermal development and differentiation, suggesting a novel role for microorganisms in skin barrier structure and function. Together, the work presented in this thesis highlights the complex dynamics of skin microbial communities and their impact on the host.