Polycomb Group (PcG) complexes PRC1 and PRC2 are well known for silencing specific developmental genes. PRC2 is a methyltransferase targeting histone H3K27 and producing H3K27me3, essential for stable silencing. Less well known but quantitatively much more important is the genome-wide role of PRC2 that dimethylates ~70% of total H3K27. We show that H3K27me2 occurs in inverse proportion to transcriptional activity in most non-PcG target genes and intergenic regions. H3K27me2 levels are governed by opposing roaming activities of PRC2 and the H3K27 demethylase UTX complexes. Surprisingly, loss of H3K27me2 results in global transcriptional derepression proportionally greatest in silent or weakly transcribed intergenic and genic regions and accompanied by increase of H3K27ac and H3K4me1. H3K27me2 therefore sets a threshold that prevents random, unscheduled transcription all over the genome and limits the activity of even highly transcribed genes. PRC1-type complexes also have global roles. Unexpectedly, we find a pervasive distribution of histone H2A ubiquitylated at lysine 118 (H2AK118ub) outside of canonical PcG target regions, dependent on the RING1 subunit of PRC1-type complexes. We show, however, that H2AK118ub does not mediate the global PRC2 activity nor the global repression and is produced by a new complex involving L(3)73Ah, a homolog of mammalian PCGF3.