The complete picture on how stem cells actually repair damaged tissue has yet to be fully defined. There are a number of studied mechanisms, and it is most likely that there are a multitude of events that take place during this treatment process, and it is the combination of modalities that leads to repair success.
The original theory was that injected stem cells would directly change, or differentiate, into new tissue cells. These new tissue cells were thought to be the actual injected stem cells that had turned into whatever cells the body needed at the site of injury. This has shown to be part of the overall picture, but not as much as initially thought.
A great article from 2010 studied human stem cells in mice that had experienced cardiac injury (I. Chimenti, R. R. Smith, et al., "Relative Roles of Direct Regeneration Versus Paracrine Effects of Human Cardiosphere-Derived Cells Transplanted Into Infarcted Mice", Circulation Research, Vol. 106, No. 5, pp.971-980, 2010). This study demonstrated a contribution from differentiating stem cells along with the release of certain growth factors and beneficial molecules. The authors concluded that differentiation only accounted for 20-50% of the repair process. Stem cell released molecules such as growth factors, antioxidants, and anti-inflammatory factors actually seem to play a more important role. All of these substances together help to promote the proliferation of cells, the migration of existing stem cells, and the boosting of the immune system. The researchers claimed that these mechanisms accounted for 50-80% of the repair mechanism.
In addition, when stem cells are given systemically (such as through an IV), multiple studies have shown that only a small portion of the stem cells end up at the site of injury or disease. The majority end up scattered throughout the body, and the lifespan of these cells seems to be less than originally thought. This supports the idea that other factors are involved in the repair process, not just stem cells changing into normal, healthy tissue cells.
In addition to the large array of growth factors that help with the repair process, it appears that other mechanisms also play some role. A study by J. Spees, M. Whitney, et al. elucidated the role in mitochondrial transfer between stem cells and existing damaged cells ("Mitochondrial transfer between cells can rescue aerobic respiration", Proceedings of the National Academy of Sciences of the USA, Vol. 103, No. 5, pp. 1283-1288, 2006). Our mitochondria are responsible for the life of our cells, and there a variety of reasons why the mitochondria will not function properly. This can occur in certain disease states, with advancing age, and with injury to tissues. This study showed that stem cells can transfer mitochondrial DNA into damaged cells and thus rescue them from death.
Fusion of two cells may also play a role in this scenario, as a stem cell may fuse with an existing cell, again transferring genetic material and rescuing the cell from death. This has been shown in more than one study, including a more recent set of studies edited by T. Dittmar and K. Zanker titled "Cell Fusion in Health and Disease", released in 2011.
These are just some of the mechanisms that appear to play a part in the healing effects of stem cells. Research is ongoing and time will give us many more answers (and most likely, more questions as well). Stay tuned for more....