Streptococcus pneumoniae (S. pneumoniae) uses genetic plasticity to achieve phenotypic diversity. The genetic plasticity is reflected by the highly variable genome sequences of this species, which leads to the variation in drug resistance, antigenicity of capsular polysaccharides and surface proteins, colony morphology, and pathogenicity among different pneumococcal strains. Natural transformation of S. pneumoniae is a major known mechanism behind the genetic plasticity, which is characterized by uptake of the exogenous DNA from the environment. Recent studies from our laboratory have revealed that S. pneumoniae is capable of endogenous DNA recombinations in the DNA methyltransferase genes, thereby generating daughter cells with variable genome methylation patterns (or methylomes). These epigenetic switches lead to pneumococcal reversible phase variation between opaque and transparent colony phenotypes, which are associated with differential capabilities in epithelial adherence and nasopharyngeal colonization. In this review, we describe how S. pneumoniae enhances the phenotypic diversity by the genetic and epigenetic mechanisms with a focus on the impact of DNA inversion-driven epigenetic switch and thereby phase variation on pneumococcal pathogenesis.