The major focus of this Review is on the mechanisms of islet beta cell failure in the pathogenesis of obesity-associated type 2 diabetes (T2D). As this demise occurs within the context of beta cell compensation for insulin resistance, consideration is also given to the mechanisms involved in the compensation process, including mechanisms for expansion of beta cell mass and for enhanced beta cell performance. The importance of genetic, intrauterine, and environmental factors in the determination of "susceptible" islets and overall risk for T2D is reviewed. The likely mechanisms of beta cell failure are discussed within the two broad categories: those with initiation and those with progression roles.