Overall, there are about ten times as many bacteria as human cells in the body, 100 trillion (1014) versus 10 trillion (1013), with bacterial cells being much smaller than human cells. Most of the bacteria live in the mouth, the small intestine, the colon, and on the skin. It is estimated that 500-1000 different species of bacteria live in the human body.
Many of the bacteria in the digestive tract are able to break down certain nutrients (often carbohydrates) that humans otherwise couldn't digest. The majority of these commensal bacteria are anaerobes.
E. coli is a bacterium that lives in the colon; it is an extensively studied model organism and probably the best understood organism of all (if one disregards viruses).
Certain mutated strands of these gut bacteria can cause disease; an example is Escherichia coli O157:H7