Dolly's birth stunned the scientific community for two main reasons. The first was that she existed at all. The creation of a viable clone of a complex mammal was unexpected.
To create Dolly, scientists took an adult mammary cell from the udder of another sheep (she was called Dolly after the singer Dolly Parton, something to do with mammary cells!) They stripped away all the cellular machinery to leave the nucleus containing DNA and all the genetic material needed to create life. Then they introduced this into an oocyte (an unfertilised egg) that had had its nucleus removed. The process is known as somatic cell transfer and fertilisation was kick-started with a jolt of electricity. When the hybrid cell began to divide and develop into a blastocyst it was implanted into a surrogate mother.
The second incredible fact about the technology was that it showed that an adult differentiated cell, that is a mature cell that has reached the end of its developmental stages, could in effect be wiped back to its original state. So the mammary cell reverted back to its embryonic stage. The fascinating part about this is that a blank cell has the potential to grow into any other cell and could therefore be used to mend ageing tissues and organs.