Dwarf galaxies are a complex population. They comprise objects with young and old stellar populations, slow and fast rotation, as well as single- and multi-component structure. These characteristics show correlations with environmental density - we thus believe that dwarf galaxies hold a fossil record of how environment affected galaxy evolution. In this talk I will review and discuss recent progress on our understanding of dwarf galaxies in clusters, both from the observational and the modelling side. In particular, I will attempt to reconcile the proposed formation mechanisms of early-type dwarf galaxies - the most abundant population in clusters - with the continuous environmental influence predicted by cosmological simulations.