This paper discusses the interrelated phenomena of solid electrolyte interphase (SEI) formation and the irreversible charge consumption which occurs during the first cycle of a graphite electrode, as well as their relevance to the cycling stability of lithium-ion batteries. Thus, results from relevant characterization methods, namely, in situ mass spectrometry, in situ infrared spectroscopy, in situ Raman and video microscopy, in situ scanning probe microscopy, in situ quartz crystal microbalance, and differential scanning calorimetry were combined for a more thorough understanding of observations made in cycling experiments. From electrochemical cycling tests, we have learned that a high specific charge (similar to 360 Ah/kg of carbon), satisfactory cycle life of the graphite electrodes (1000 deep cycles), and an irreversible charge of <7% during SEI formation can only be obtained when water contamination of the cell is avoided. Under such conditions, a good-quality SEI film is formed on the carbon surface. We conclude that during SEI film formation, at first the carbonate solvent(s) are reduced, forming ethylene gas, organic radicals, oligomers, and polymers. Then a SEI film is precipitated on the surface via a nucleation and growth mechanism. The irreversible charge consumption due to SEI formation is proportional to the BET specific surface area of the graphite and rapidly increases with increasing water content in the cell.