Although a monophyletic group, male (XX/XY) and female heterogametic (WZ/ZZ) sex chromosome systems with a couple of variants like XX/X, Z/ZZ and multiple sex chromosome systems occur in insects. Molecular and morphological differences between X and Y or W and Z range from imperceptible to conspicuous. This article illustrates sex chromosome differentiation mainly in two fly species, Drosophila melanogaster and Megaselia scalaris, and in Lepidoptera. The earliest phases of XY evolution are present in the fly M. scalaris. Occasionally in this species, the male determining gene jumps to another chromosome, transforming the new host chromosome to a functional Y chromosome. Thus, in M. scalaris there are strains with virtually no XY differentiation (except for the sex determining function) and others with a moderate degree of differentiation. Base substitutions and alterations like sequence deletions, duplications, and insertions of mobile sequences mark the onset of molecular differentiation. Accumulation of molecular changes and coarser alterations are thought to lead to the morphological differences seen in WZ chromosome pairs of Lepidoptera. The W chromosome probably evolved in the most numerous clade of Lepidoptera, the Ditrysia, after it diverged from the common lepidopteran stem. Extant species display various degrees of molecular and morphological differentiation of the W chromosome, translocation or fusion with autosomes, and loss of the W.