Stem cells have two important characteristics that distinguish them from other types of cells. First, they are unspecialized cells that renew themselves for long periods through cell division. Second, under certain physiologic or experimental conditions, they can be induced to become cells with special functions such as the beating cells of the heart muscle, the insulin-producing cells of the pancreas, or the cells that form tendon or cartilage. Stem cells can therefore serve as a sort of repair system for the body; they can theoretically divide without limit and replenish damaged tissues.

Roughly, there are 2 types of stem cells: embryonic stem cells and adult stem cells. Embryonic stem cells are derived from embryos. They can differentiate into many different cell types but this process is difficult to control. There is therefore always a concern that embryonic stem cells may generate unwanted cell types and tumours when injected into animals. Furthermore there is an ongoing debate on the ethical issues related to embryonic stem cells.
Adult stem cells are undifferentiated cells found among differentiated cells in a tissue or organ in a live born animal. They can proliferate and differentiate to yield the major specialized cell types of the tissue or organ. The primary role of adult stem cells in a living organism are to maintain and repair the tissue in which they are found. They can be used in an autologous way ( viz. the animal is treated with its own cells) avoiding transmission of pathogens and rejection.

 

The major sources from which adults stem cells can be obtained are bone marrow,  fat, umbilical cord etc.
Bone marrow contains at least two kinds of stem cells. One population, called hematopoietic stem cells, forms all the blood cells in the body.
A second population, called mesenchymal stem cells (or  stromal cells), generates bone, cartilage, fat, tendon, ligament, etc. Fat tissue is easily accessible and provides a rich source of mesenchymal stem cells.