Genomics and proteomics methods have witnessed a huge surge in the recent decade. Provided the pace of data accumulation from several advanced technologies such as next-generation sequencing, transcriptomics, ChipSeq and quantitative proteomics, the parallel growth in the functional annotation is relatively slow and needs continuous curation and analysis of existed data from repositories. Nevertheless, the standard procedures of functional annotations of proteins which were based on classical data sets, need to be revised in light of advanced and more comprehensive data. In fact, most omics technologies are now integrating and their merger can provide a much realistic and holistic picture of any biochemical and molecular scenario provided the data handling and curation is performed on cellular and molecular principles. A number of genomes and proteomes have been functionally annotated in the past; microbial genomes offer a better opportunity with less complex models. Nevertheless, microbes are among one of the most common causatives of pathogenic diseases and their diagnosis, treatment is limited by available information of proteins and their functions. Previously annotated hypothetical functions to proteins are likely to change in some cases therefore a number of research groups have attempted to re-annotate the microbial genomes with newer data-sets and new tools. Re-annotation of Mycobacterium tuberculosis was one such example. Besides pathogenic microbes, emerging trends in various useful microbes sequencing have shown a tremendous increase in information on human microflora and remain a highly prospective area in biology. Systems biology lies at the interphase of biology, mathematics and computational biology and involves a holistic approach to visualize a biological phenomenon. This chapter describes the basic principles involved in the functional annotation of hypothetical proteins in light of emerging datasets and tools. Besides the suggestions on improving standard pipelines, it also presents a summary of recently annotated microbial genomes and future prospects of involving systems biology in the functional annotation for improved quality and output.