Most species have long, spirally curved abdomens, which are soft, unlike the hard, calcified abdomens seen in related crustaceans. The vulnerable abdomen is protected from predators by a salvaged empty seashell carried by the hermit crab, into which its whole body can retract. Most frequently hermit crabs use the shells of sea snails; the tip of the hermit crab's abdomen is adapted to clasp strongly onto the columella of the snail shell. As the hermit crab grows in size, it has to find a larger shell and abandon the previous one. This habit of living in a second hand shell gives rise to the popular name "hermit crab", by analogy to a hermit who lives alone. Several hermit crab species, both terrestrial and marine, use “vacancy chains” to find new shells: when a new, bigger shell becomes available, hermit crabs gather around it and form a kind of queue from largest to smallest. When the largest crab moves into the new shell, the second biggest crab moves into the newly vacated shell, thereby making its previous shell available to the third crab, and so on.

Of about five hundred known species, most are aquatic and live in varying depths of saltwater, from shallow reefs and shorelines to deep sea bottoms. However, tropical areas host some terrestrial species.

As hermit crabs grow they require larger shells. Since suitable intact gastropod shells are sometimes a limited resource, there is often vigorous competition among hermit crabs for shells. The availability of empty shells at any given place depends on the relative abundance of gastropods and hermit crabs, matched for size. An equally important issue is the population of organisms that prey upon gastropods and leave the shells intact.

A hermit crab with a shell that is too small cannot grow as fast as those with well-fitting shells, and is more likely to be eaten if it cannot retract completely into the shell.

For some larger marine species, supporting one or more sea anemones on the shell can scare away predators. The sea anemone benefits because it is in position to consume fragments of the hermit crab's meals.

Hermit crab species range in size, shape, from species with a carapace only a few millimetres long to Coenobita brevimanus which can approach the size of a coconut. The shell-less hermit crab Birgus latro is the world's largest terrestrial invertebrate.

The young develop in stages, with the first two (the nauplius and protozoea) occurring inside the egg. Most hermit crab larvae hatch at the third stage, the zoea. This is a larval stage wherein the crab has several long spines, a long narrow abdomen, and large fringed antennae. After several zoeal moults, this is followed by the final larval stage, the megalopa stage.

Hermit crabs are more closely related to squat lobsters and porcelain crabs than they are to true crabs. The king crabs in the family Lithodidae were formerly considered to be derived hermit crabs, but are now placed in a separate superfamily.

Six families are recognised in the superfamily Paguroidea, containing aroud 800 species in total.

The fossil record of in situ hermit crabs using gastropod shells stretches back to the Late Cretaceous. Before that time, at least some hermit crabs used ammonites' shells instead, as shown by a specimen of Palaeopagurus vandenengeli from the Speeton Clay, Yorkshire, UK from the Lower Cretaceous.