The discovery of histone acetylation causing changes in transcription activity can be traced back to the work of Vicent Allfrey and colleagues in 1964. The group hypothesized that histone proteins modified by acetyl groups added negative charges to the positive lysines, and thus, reduced the interaction between DNA and histones.  Histone modification is now considered a major regulatory mechanism that is involved in many different stages of genetic functions.  Our current understanding is that acetylated lysine residues on histone tails is associated with transcriptional activation. In turn, deacetylated histones are associated with transcriptional repression. In addition, negative correlations have been found between several histone acetylation marks.
The regulatory mechanism is thought to be twofold. Lysine is an amino acid with a positive charge when unmodified. Lysines on the amino terminal tails of histones have a tendency to weaken the chromatin's overall structure. Addition of an acetyl group, which carries a negative charge, effectively removes the positive charge and hence, reduces the interaction between the histone tail and the nucleosome.  This opens up the usually tightly packed nucleosome and allows transcription machinery to come into contact with the DNA template, leading to gene transcription. Repression of gene transcription is achieved by the reverse of this mechanism. The acetyl group is removed by one of the HDAC enzymes during deacetylation, allowing histones to interact with DNA more tightly to form compacted nucleosome assembly. This increase in the rigid structure prevents the incorporation of transcriptional machinery, effectively silencing gene transcription.
Another implication of histone acetylation is to provide a platform for protein binding. As a posttranslational modification, the acetylation of histones can attract proteins to elongated chromatin that has been marked by acetyl groups. It has been hypothesized that the histone tails offer recognition sites that attract proteins responsible for transcriptional activation. Unlike histone core proteins, histone tails are not part of the nucleosome core and are exposed to protein interaction. A model proposed that the acetylation of H3 histones activates gene transcription by attracting other transcription related complexes. Therefore, the acetyl mark provides a site for protein recognition where transcription factors interact with the acetylated histone tails via their bromodomain.