Sensory placodes are unique domains of thickened ectoderm in the vertebrate head that form important parts of the cranial sensory nervous system, contributing to sense organs and cranial ganglia. They generate many different cell types, ranging from simple lens fibers to neurons and sensory cells. Although progress has been made to identify cell interactions and signaling pathways that induce placodes at precise positions along the neural tube, little is known about how their precursors are specified. Here, we review the evidence that placodes arise from a unique territory, the pre-placodal region, distinct from other ectodermal derivatives. We summarize the cellular and molecular mechanisms that confer pre-placode character and differentiate placode precursors from future neural and neural crest cells. We then examine the events that subdivide the pre-placodal region into individual placodes with distinct identity. Finally, we discuss the hypothesis that pre-placodal cells have acquired a state of "placode bias" that is necessary for their progression to mature placodes and how such bias may be established molecularly.