Telomere dynamics are a critical component of both aging and cancer. Telomeres progressively shorten in almost all dividing cells and most human cells do not express or maintain sufficient telomerase activity to fully maintain telomeres. There is accumulating evidence that when only a few telomeres are short, they form end-associations, leading to a DNA damage signal resulting in replicative senescence (a cellular growth arrest, also called the M1 stage). In the absence of cell-cycle checkpoint pathways (e.g. p53 and or p16/Rb), cells bypass M1 senescence and telomeres continue to shorten eventually resulting in crisis (also called the M2 stage). M2 is characterized by many ‘uncapped’ chromosome ends, end-fusions, chromosome breakage fusion-bridge cycles, mitotic catastrophe and a high fraction of apoptotic cells. In a rare M2 cell, telomerase (a cellular reverse transcriptase) can be reactivated or up-regulated, resulting in indefinite cell proliferation. This cellular immortalization is a potentially rate-limiting step in carcinogenesis that is important for the continuing evolution of most advanced cancers. In this perspective we will present our views on the evidence for telomere dysfunction in aging and in cancer progression. We will argue that telomere shortening in the absence of other alterations may be a potent tumor suppressor mechanism and we will discuss the evidence for and against the major molecular mechanisms proposed to initiate replicative senescence.