Bone marrow is the spongy tissue inside your bones. Bone marrow produces new blood cells - red blood cells, platelets, and white blood cells. While blood samples can show much information about the body, blood diseases are often diagnosed by studying a sample of bone marrow. In the stroma of the bone marrow are stem cells which have the ability to grow into different types of cells.
Stem cells are undeveloped cells in the body. They are remarkable because they have the ability to develop into any of the 200+ cell types in the human body, and once developed, can produce more cells like themselves. Stem cells are vital to the body's ability to heal itself, and to renew itself as old cells die (such as the skin, which is constantly in the process of sloughing off dead cells and making new ones below the surface.)
Simply put, stem cells are taken from the bone marrow of either the patient or a donor, and then the patient's bone marrow is “killed” using radiation. The healthy stem cells are then reintroduced to the bone, and will develop into bone marrow. When successful, the new bone marrow builds a healthy blood system.