The Basics

Stem cells are unspecialized cells that can reproduce through mitosis. They are notable in that they are not differentiated: they do not perform a specific function. There are two main types of stem cells- embryonic and adult. Embryonic stem cells have yet to become differentiated into liver cells, brain cells, etc. They are pluripotent; they are able to differentiate into many different types of cells. Adult stem cells differ from embryonic ones in that they are not pluripotent. They differentiate to perform the function that the cells around them perform.  Embryonic stem cells are also able to last longer without differentiating.

Given certain physiologic or experimental conditions, stem cells can be induced to become specialized. Organs such as the gut ad the bone marrow are sites of frequent cell damage and death; stem cells in these regions regularly divide and specialize in order to replace damaged or worn cells. 









Sources: 
http://stemcells.nih.gov/Pages/Default.aspx
http://stemcells.nih.gov/info/basics/pages/basics1.aspx