The following is from (Hatini and DiNardo, 2001)

Hh signaling is critically involved in the subdivision of the ventral larval cuticle into alternating bands of naked and denticlecovered cuticle (Bejsovec and Wieschaus, 1993; Forbes et al., 1993). Naked cuticle is specified by wg activity in three to four cell rows anterior to the Wg source, and in one cell row posteriorly (Bejsovec and Martinez Arias, 1991; Bejsovec and Wieschaus, 1993; Gritzan et al., 1999; Sanson et al., 1999). wg itself is a Hh target gene, and is expressed in one row of cells anterior to the en- and hh-expressing cells (Baker, 1988; DiNardo et al., 1988; Hidalgo and Ingham, 1990; Ingham, 1993; Ingham et al., 1988). Lack of Hh results in absence of Wg, and hence absence of naked ventral cuticle (Hidalgo and Ingham, 1990; Ingham et al., 1991; Bejsovec and Wieschaus, 1993; Fig. 6A,B). Ectopic hh signaling results in an expansion of the wg expression domain and thus an expansion of naked cuticle (Ingham, 1993; Tabata and Kornberg, 1994).

wg is expressed in a row of cells that underlies the middle of the naked cuticle expanse (Baker, 1987). en (DiNardo, 1985; Fjose, 1985; Kornberg, 1985) and hh (Mohler,, 1992; Lee, 1992) are both expressed in the two rows of cells just posterior to the wg row: one row gives rise to naked cuticle, the other to the first row of denticles (Hama, 1990; Dougan, 1992). Thes adjacent wg and en/hh expression domains are activated at stage 5 by pair-rule gene activity and, in wild-type, are stably maintained until late stages of embryonic development (reviewed in Akam, 1987; Ingham, 1988) ptc is initially expressed in all cells of the segment but its transcription is shut off rapidly in the en cells (Nakano, 1989; Hooper, 1989). Later in development its expression is modulated again to give lower expression in cells at the middle of its expression domain.

Communication between the epidermal cells:
A signal from the wg-expressing cells is required to stabilize en expression in the adjacent row of cells; in the absence of wg activity, en expression decays by stage 9 (Martinez Arias, 1988; DiNardo, 1988; Bejsovec, 1991; Heemskerk, 1991). wg is a secreted molecule that is detected in neighboring cells on either side of the wg-expressing stripe (van den Heuvel, 1989; Gonzalez, 1991) and therefore is probably itself the signal. In addition, a signal from the en/hh-expressing cells is required to stabilize wg expression; in the absence of en activity, wg expression decays during stages 10 and 11 (Martinez Arias, 1988; Bejsovec, 1991). hh is the likely candidate because wg expression decays in hh mutants (Hidalgo, 1990).

These en and hh-expressing epidermal cells in the most posterior part of the segment secrete the first row of denticles in the wild-type denticle belt. The segment border lies between the first row of denticles, which aare small and point anteriorly, and the second row of denticles, which are longer and point posteriorly. The second and third row are similar in appearance but second row denticles, particularly those near the ventral midline, tend to be thinner and less sharply hooked. Fourth row denticles are small and point anteriorly. Fifth row denticles are large and thick, and point posteriorly. Sixth drow denticles are very small and point posteriorly. The remainder of the segment consists of naked cuticle.

Naked cuticle arises because shavenbaby is repressed in response to Wingless signaling (Payre, 1999)

From (Alexandre, et al 1999)

In this paper, we show that veinlet (rhom) and Serrate are
segmentation genes acting downstream of segment polarity
genes and thus form an additional layer in the segmentation
cascade initiated by gap and pair-rule genes. We have worked
out how the localized expression of Wingless and Hedgehog at
the parasegment boundary leads to expression of Serrate
and veinlet (rhom) at specific positions within the segmental
pattern (Fig. 7A-C). Both signaling pathways repress Serrate
expression. Since both pathways are believed to activate
transcription, we imagine that they activate the expression of a
repressor of Serrate. In addition, Serrate may also be negatively
regulated by the transcriptional repressor Engrailed. In contrast
to Serrate, veinlet (rhom) is regulated both positively and
negatively: it is repressed by Wingless (Sanson et al., 1999;
Gritzan et al., 1999) and activated by Hedgehog (Fig. 2).
In addition to this vertical flow of information, regulatory
interactions also exist between veinlet (rhom) and Serrate. At
the least, Serrate activates veinlet (rhom) expression by way
of the Notch pathway (Fig. 3). This effect is purely non-cell
autonomous. In contrast, Serrate appears to repress veinlet
(rhom) in a cell autonomous manner (indeed, in cells where
it is expressed, Serrate represses the Notch pathway;
Micchelli et al., 1997). However, it is also possible that
whichever mechanism activates Serrate expression also
represses veinlet (rhom) expression. This would explain why
the expression of Serrate and veinlet (rhom) is always
mutually exclusive.
The regulatory interactions summarised above are sufficient
to explain the spatial pattern of both Serrate (Fig. 7B) and
veinlet (rhom) (Fig. 7C) expression. Non-autonomous
repression of Serrate by Wingless and Hedgehog ensures that
Serrate is expressed in stripes. As we have shown, the spread
of Wingless towards the anterior defines the posterior edge of
the domain of Serrate expression. Similarly, the anterior edge
of the Serrate domain appears to be specified over three cell
diameters by Hedgehog (Fig. 7B) slightly further than expected
since Hedgehog is thought to act only over 1-2 cells in
Drosophila embryos (Fietz et al., 1995). Expression of veinlet
(rhom) is activated by two different signals, Hedgehog at the
anterior and Serrate at the posterior. Although Hedgehog
signaling is symmetrical, it does not activate veinlet (rhom)
expression anteriorly (blocked red arrow in Fig. 7C) because
there, Wingless represses veinlet (rhom) expression. Likewise,
Serrate activates veinlet (rhom) expression but only on one side
because of unilateral repression by Wingless (blocked green
arrow in Fig. 7C).
These interactions display a clear temporal hierarchy. The
secreted molecules Hedgehog and Wingless are expressed first
and where they do not reach, Serrate expression is
subsequently allowed. At stage 11, Hedgehog and Serrate
activates veinlet (rhom) expression in separate cells.
Ultimately, this chain of interactions results in detailed patterns
of gene expression.

Correlating signaling pathways with denticle type
Mapping the expression pattern of various genes onto the
denticle pattern suggests simple correlations, which are listed
in the Results and summarised in Fig. 7D.
These correlations have allowed us to see pattern where it
was previously thought there was none, as in wingless mutants
(Fig. 6B). We now believe that wingless mutants make denticle
type 3, 4 and 5 and not exclusively type 5 as suggested by
Bejsovec and Wieschaus (1993). The correlations provide a
guide to understand various phenotypes such as those of
patched mutants and wg -en -double mutants. In wg -en -double
mutants, the correlation between gene expression and denticle
type/polarity is particularly evident. As we have shown,
expression of veinlet (rhom) is in circles surrounded by Serrate
expression and this correlates with polarity reversal in the
cuticle. Non-uniform gene expression shows that these
embryos have more pattern than previously noted (Lawrence
et al., 1996). For such embryos to be truly unpatterned, they
would have to express Serrate uniformly as well as not express
veinlet (rhom). This may occur in wg -en -hh - triple mutants
since they may not contain any repressor of Serrate. We
presume that the converse situation (Serrate ‘off’ and veinlet
(rhom) ‘on’ everywhere) would also lead to unpatterned
embryos. We predict that this situation would prevail in wg -
ptc -en - triple mutants.
Although the correlations have good predictive value (Fig.
6), they suffer from several limitations. First, denticle shape
does not necessarily reflect an integer value. Indeed,
unambiguous typing is not always possible and exact denticle
shapes vary from segment to segment. Second, causal
relationships between the activation of a particular signaling
pathway and a given denticle type still remain to be
investigated. We expect that the various signaling pathways
control cytoskeletal behavior, which in turn affects denticle
shape and cell polarity. Local polarity reversals indicate that
individual cells are able to locate the source of a particular
signal, suggesting that subcellular signaling complexes control
the cytoskeleton directly. Third, we cannot exclude the
involvement of additional regulators. In particular, it is possible
that redundant regulators of the Notch and Egfr pathway
contribute to the choice of denticle type. These could include
Vein (another Egfr ligand; Schnepp et al., 1996), Delta (a
Notch ligand; Fehon et al., 1990) or possibly Fringe. vein is
not required for embryogenesis (Schnepp et al., 1996)
suggesting that it does not play an important role if any.
Possible contributions from Delta to denticle patterning are not
readily assessed because of Delta’s earlier action in
neurogenesis (Lehmann et al., 1983). We are currently
attempting to overcome this problem.
The role of morphogens in the denticle pattern
Our results show that no single morphogen organises the
denticle pattern: patterning arises, at least initially, from the
combined actions of Wingless and Hedgehog. We now discuss
in turn to what extent either of these two factors have attributes
of a morphogen in this system.
Wingless is clearly not involved in the specification of
denticle types (or diversity) across each belt since it does not
act in this region of the epidermis. If it did, veinlet (rhom) and
Serrate would not be expressed because, as we have shown,
they are both repressed by Wingless. Nevertheless, Wingless acts at a distance, over 3- to 5-cell diameters to set the
boundaries of the Serrate expression domain and thus
establishes conditions for subsequent juxtacrine signaling.
Long-range Wingless action is also required for the
asymmetric action of Serrate: Serrate does not activate veinlet
(rhom) expression posteriorly because of the presence of
Wingless there, 3- to 5-cell diameters from the site of wingless
transcription. In this sense, Wingless modulates, at a distance,
the outcome of local signaling. In neither of these activities is
there evidence for concentration-dependent signaling.
However, one cannot formally exclude the possibility that the
specification of type 6 denticle requires low-level Wingless.
Furthermore, the suggestion that Wingless is not a morphogen
in the embryonic epidermis is at odds with studies of the first
thoracic segment where various levels of Wingless signalling
lead to the specification of distinct cuticular structures
(Lawrence et al., 1996). Re-assessment of these phenotypes
with early molecular markers might tell whether or not
Wingless acts directly in a concentration-dependent manner in
the embryonic epidermis.
The situation with Hedgehog is clearer since it has
qualitatively distinct effects over a narrow strip of cells (Fig.
7B,C). It activates veinlet (rhom) expression in adjoining
posterior cells while its repressive effect on Serrate expression
extends over three cell diameters. This suggests that, at high
level, Hedgehog activates veinlet (rhom) (near the source)
while at both low and high levels it repress Serrate expression
(further away from the source). In this sense, Hedgehog
qualifies as a morphogen (as originally suggested by
Heemskerk and DiNardo, 1994). Whether differential
responses at different distances from the Hedgehog source
reflect true concentration dependence remains to be assessed.
We note here that the repressive effect of Hedgehog on Serrate
expression might take place early in development since, in
wingless mutants, hedgehog expression decays around stage 10
(Lee et al., 1992) and yet Serrate expression is still confined
at the anterior (Fig. 4F). We suggest that early Hedgehog has
a repressive effect on Serrate expression that lasts at least until
stage 11, when veinlet (rhom) expression commences. It is
therefore conceivable that the 3-cell-wide domain where
Serrate is repressed at stage 11 originates by cell proliferation
from a single row of cells that abut the Hedgehog source at
early embryonic stages. According to this scenario, the effects
of Hedgehog on Serrate and veinlet (rhom) expression would
both be occurring over one cell diameter. The apparent
difference in range would reflect the difference in timing
between these two effects and the intervening proliferation. We
are currently testing this model by assessing the activity of a
membrane-tethered form of Hedgehog.
To sum up, in the bald area of abdominal segments, one cell
type forms in response to one signaling pathway while within
denticle belts, a rich pattern of cell types arise from juxtacrine
cell interactions initiated by the activation of distinct signaling
pathways. Some of these pathways are controlled by the
localised expression of segment polarity genes such as
wingless and hedgehog while others are regulated by
downstream genes like veinlet (rhom) and Serrate. Because
wingless and hedgehog are expressed first, they are effectively
at the top of the hierarchy and the knock-on effects of losing
hedgehog or wingless function explain the “organiser activity”
of the parasegment boundary. Interestingly, the denticle pattern arises from the combined action of Wingless and
Hedgehog originating from the parasegment boundaries of
adjacent segments and therefore, two parasegment boundaries
are needed to provide the signals that pattern a single denticle
belt.