Stem cells are special cells that have not decided what they are yet.

Stem cells can form any body part, including body parts that normally don't regenerate. If you can control the stem cells and inject them then you can do things like re-grow kidneys or a liver, or make better bone and skin repairs.
Or more scientifically put:
Stem cells are cells found in most, if not all, multi-cellular organisms. They are characterized by the ability to renew themselves through mitotic cell division and differentiating into a diverse range of specialized cell types.
There are three basic types of stem cells. Fetal stem cells are found in human beings during the fetal stage of development and can be harvested from aborted fetuses or from the umbilical cord of a newly delivered baby. Embryonic stem cells are found in embryos and are generally harvested from frozen embryos that are designated to be incinerated as medical waste. Adult stem cells, on the other hand, are found in many different tissues within the human body and can be harvested, to a limited extent, without harming the individual or causing excessive pain.
A bone marrow transplant, more commonly known as a stem cell transplant, replaces damaged bone marrow with healthy bone marrow stem cells.
Bone marrow is a spongy tissue found in the hollow centres of some bones. It contains specialist stem cells which produce the body's blood cells.
Stem cells in bone marrow produce three important types of blood cells:
• red blood cells – which carry oxygen around the body
• white blood cells – which help fight infection
• platelets – which help stop bleeding
Embryonic stem cells can be used in research to:
• Improve our understanding of how the body develops from a fertilized egg; this can also provide insights into how our adult tissues are maintained and repaired in health
• Understand how diseases occur and develop; a number of diseases, such as cancer or birth defects, are the result of problems in the process of differentiation from stem cells to more specialized cells
• Search for and test potential new drugs by studying cells in the laboratory
• Develop future cell-based therapies for currently untreatable diseases
Researchers can use embryonic stem cells to produce specialized cells like nerve or heart cells in the lab. These specialized cells can be studied in detail to understand more