The operon theory proposes that genes are organized into operons - clusters of genes under the control of a single promoter. An operon contains a promoter, operator, and multiple structural genes. The lac operon in E. coli regulates genes involved in lactose metabolism. It is negatively regulated - in the absence of lactose, a repressor binds the operator to prevent transcription, but lactose or allolactose induce transcription by binding to the repressor. The operon theory explains how bacteria regulate gene expression in response to environmental conditions.