To understand the big excitement about stem cells, you have to understand the specialized nature of the human body. The cells that makes up our body are all differentiated, or to put in layman's perspective, having their own unique character and attitude to boot. For e.g, the neurons or nerve cells are specialized as an extremely nimble communication device, they form network connections among themselves and begin the formation and accumulation and storage of bits of data called thought and store them as "memory". The kidney cells on the other hand act as filters, the liver cells as detox workers and so on. In an adult body, usually the cells stay as the same once they have already differentiated. Meaning, its no mean feat to get your neuron to change to a pancreatic beta cell or vice versa.
So for a long time, scientists have been trying to find the most undifferenciated cells or "stem cells" from the small pool of stem cell niche. These cells in the preliminary experiments long time back have been shown to be coaxed to change to many different types of cells based on the culture conditions and growth factors. In other words, you could feed them to make them whatever you want them to be.
Here is an example of the differenciation of a stem cell that is naturally programmed as the precursor of blood cells.

Photo courtesy: http://training.seer.cancer.gov
The iPS cells can be produced by introducing just 4 genes in addition to normal genes already present in a normal cell. So, you have "embryonic like cells" from just genetically engineering a normal mice cell. ( from the lab of Shinya Yamanaka of Kyoto University)
The genes that stood out in stem cell maintenance were Oct4, Sox2, Klf4 and c-myc. Interestingly some of these are known oncogenes (genes that can produce cancer).
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A major advantage of reprogramming is to create or mould one kind of adult cell to another kind of adult cell. This is a paradigm shift from our classical hypothesis that was always taught which goes.. "Cell differenciation is a one way road". Apparently, some labs have already shown that there are techniques and genes involved in the change of one kind of cell to another, in other words, reprogram the cell differenciation process.
This could in theory change the way we attempt treatment.
If for e.g, a patient with young onset diabetes chooses, in future he may be able to change his skin cells or perhaps even his belly fat cells to be programmed to be pancreatic beta cells of the Islets of Langerhans. These new cells than can make insulin in the hosts body and control the blood glucose level naturally. This will also remove the risks associated with islet transplantation and immune rejections that are sometimes a common problem with Type I diabetes treatment.






