Global loss of DNA methylation and CpG island (CGI) hypermethylation are key epigenomic aberrations in cancer. Global loss manifests itself in partially methylated domains (PMDs) which extend up to megabases. However, the distribution of PMDs within and between tumor types, and their effects on key functional genomic elements including CGIs are poorly defined. We comprehensively show that loss of methylation in PMDs occurs in a large fraction of the genome and represents the prime source of DNA methylation variation. PMDs are hypervariable in methylation level, size and distribution, and display elevated mutation rates. They impose intermediate DNA methylation levels incognizant of functional genomic elements including CGIs, underpinning a CGI methylator phenotype (CIMP). Repression effects on tumor suppressor genes are negligible as they are generally excluded from PMDs. The genomic distribution of PMDs reports tissue-of-origin and may represent tissue-specific silent regions which tolerate instability at the epigenetic, transcriptomic and genetic level.