We describe briefly the Palomar-Quest (PQ) digital synoptic sky survey, including its parameters, data processing, status, and plans. Exploration of the time domain is now the central scientific and technological focus of the survey. To this end, we have developed a real-time pipeline for detection of transient sources. We describe some of the early results, and lessons learned which may be useful for other, similar projects, and time-domain astronomy in general. Finally, we discuss some issues and challenges posed by the real-time analysis and scientific exploitation of massive data streams from modern synoptic sky surveys. In the first phase of the survey, data were obtained in the drift scan mode in 4.6• wide strips of a constant Dec, in the range −25• < δ < +25• , excluding the Galactic plane. The total area coverage is ∼ 15 000 deg 2 , with multiple passes, ranging from a few to about 25, and typically 5-10 times, with time baselines ranging from hours to years. There are some thin-strip gaps in the coverage, due to a combination of inter-CCD gaps, bad CCDs, and a suboptimal dithering strategy. Typical area coverage rate is up to ∼ 500 deg 2 /night in 4 filters. The raw data rate is on average ∼ 70 GB per clear night. To date, about 25 TB of usable data have been collected in the drift scan mode. Data were obtained with two filter sets, Johnson UBRI and Gunn/SDSS rizz, recently changed to griz. Effective In the second phase of the survey, which started in the spring of 2007, data are obtained in the traditional pointand-track mode, in a single, wide-band red filter (RG610), with ∼ 10% of the time in the drift scan mode. The coverage and the cadence are optimized for the nearby supernova search, in collaboration with the LBNL NSNF group, and a search for dwarf planets, in collaboration with M. Brown. Data are processed with several different pipelines, optimized for different scientific goals. This includes the Yale pipeline (Andrews et al. 2008), which does the PSF fitting and was designed for a search for gravitationally lensed quasars; the Caltech data cleaning pipeline, used to remove numerous instrumental artifacts present in the data; the Caltech real-time pipeline, used for real-time detections of transient events, as described below; the LBNL NSNF pipeline, based on image subtraction and designed for detection of nearby SNe; and a pipeline for an optimal coadding of images and detection of sources in them, now developed at Caltech. Images and resulting catalogs are stored in multiple locations, using a variety of databases.PQ is the first major digital sky survey fully designed and implemented in the Virtual Observatory (VO) era, and it uses VO standards and protocols throughout. Public data releases will be also done through VO-type interfaces. The first public data release is imminent, pending the completion of various data quality control and assessment tests.