In the body, each organ and tissue is made of cells that are highly specialized to a particular function. The process of a cell becoming specialized is called differentiation. Once a cell has become differentiated, it cannot change further into another type of cell.
Stem cells are cells that have not yet fully differentiated. They are capable of developing into any of several types of cell, such as blood cells, bone cells, nerve cells, skin cells, etc. The definition of a stem cell is a cell with ability to reproduce itself indefinitely. Fully differentiated cells (non-stem cells) either cannot reproduce or can only reproduce a certain number of times.
Stem cells develop into other types of cells through the process of cell division (mitosis). In mitosis, a parent cell replicates its DNA, and then divides into two daughter cells. Usually the daughter cells are identical to the parent cell, but in the case of a stem cell undergoing differentiation, the daughter cells are more specialized than their parent cell because of genetic signals.