Much of what we understand about Drosophila development is based on the isolation and characterization of developmental mutants by three scientists, Ed Lewis, Christiane Nusslein-Volhard, and Eric Wieschaus, who were awarded the Nobel prize for their work in 1995.  Lewis did pioneering research on late embryogenesis, while Nusslein-Volhard and Wieschaus concentrated their efforts on understanding early embryogenesis.

Nusslein-Volhard and Wieschaus set out to identify EVERY GENE required for early pattern formation in the Drosophila embryo. They looked for recessive embryonic lethal mutations, and classified them according to their phenotype before death. That is, they looked for and analyzed dead embryos. Images of some of the mutants they identified are shown below. Notice the differences in segmentation patterns between the wildtype, shown on the left, and the mutant embryos. An online historical essay about their work is here.
 

A cascade of gene activation sets up the Drosophila body plan

The maternal-effect genes, including bicoid and nanos, are required during oogenesis. The transcripts or protein products of these genes are found in the egg at fertilization, and form morphogen gradients. The maternal-effect genes encode transcription factors that regulate the expression of the gap genes. The gap genes roughly subdivide the embryo along the anterior/posterior axis. The gap genes encode transcription factors that regulate the expression of the pair-rule genes. The pair-rule genes divide the embryo into pairs of segments. The pair-rule genes encode transcription factors that regulate the expression of the segment polarity genes.  The segment polarity genes set the anterior/posterior axis of each segment.  The gap genes, pair-rule genes, and segment polarity genes are together called the segmentation genes, because they are involved in segment patterning.

But how do these segments take of individual identities?

In normal flies, structures like legs, wings, and antennae develop on particular segments, and this process requires the action of homeotic genes. Enter Ed Lewis, who discovered homeotic mutants - mutant flies in which structures characteristic of one part of the embryo are found at some other location.
 

Homeotic mutations, such  as Antennapedia, cause a misplacement of structures. These two scanning electron micrographs show fly heads. On the left is a wildtype fly. On the right is a fly with the dominant Antennapedia mutation - and legs where the antennae should be!

Photographs by  F. R. Turner,  Indiana University from ZYGOTE

The homeotic genes encode transcription factors that control the expression of genes responsible for particular anatomical structures, such as wings, legs, and antennae. The homeotic genes include a 180 nucleotide sequence called the homeobox, which is translated into a 60 amino acid domain, called the homeodomain. The homeodomain is involved in DNA binding, as shown in the images below.
 

Homeobox-containing (or HOX) genes are found in many organisms, including worms, fish, frogs, birds, mammals, and plants. Interestingly, HOX genes are found in clusters, and the relative gene order within these clusters in conserved between organisms.  That is, the order of related HOX genes in Drosophila and in mice is the same! In addition, the order of HOX-genes on the chromosome is related to where they are expressed along the anterior/posterior axis.