New DNA sequencing technologies can sequence up to one billion bases in a single day at low cost, putting large-scale sequencing within the reach of many scientists. Many researchers are forging ahead with projects to sequence a range of species using the new technologies. However, these new technologies produce read lengths as short as 35-40 nucleotides, posing challenges for genome assembly and annotation. Here we review the challenges and describe some of the bioinformatics systems that are being proposed to solve them. We specifically address issues arising from using these technologies in assembly projects, both de novo and for resequencing purposes, as well as efforts to improve genome annotation in the fragmented assemblies produced by short read lengths.