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Although stem cell research is a rather new field in modern medicine, media soon popularized it. The reason for this hype lies in the potential of stem cells to drastically increase quality of life through repairing aging and diseased organs. Nevertheless, the essence of stem cell research is to understand how tissues are maintained during adult life. In this article, we summarize the various types of stem cells and their differentiation potential in vivo and in vitro. We review current clinical applications of stem cells and highlight problems encountered when going from animal studies to clinical practice. Furthermore, we describe the current state of induced pluripotent stem cell technology and applications for disease modelling and cell replacement therapy.