Much of population genetics is based on the diffusion limit of the Wright-Fisher model, which assumes a fixed population size. This assumption is violated in most natural populations, particularly for microbes. Here we study a more realistic model that decouples birth and death events and allows for a stochastically varying population size. Under this model, classical quantities such as the probability of and time before fixation of a mutant allele can differ dramatically from their Wright-Fisher expectations. Moreover, inferences about natural selection based on Wright-Fisher assumptions can yield erroneous and even contradictory conclusions: at small population densities one allele will appear superior, whereas at large densities the other allele will dominate. Consequently, competition assays in laboratory conditions may not reflect the outcome of long-term evolution in the field. These results highlight the importance of incorporating demographic stochasticity into basic models of population genetics.