There are three basic types of stem cells. Embryonic stem cells as the name implies come from embryos and have ethical issues surrounding them. Adult stem cells can be purified from a variety of sources including bone marrow and fat. Finally, induced pluripotent stem cells are artificially made from somatic cells such as skin cells. This final type of stem cells is produced by a form of genetic engineering. Viruses are used to insert genes and change the characteristics of the cells.
Embryonic and induced pluripotent stem cells are years away from any real value as treatments because they carry a serious risk of cancer. This has not been well outlined in the press but needs to be discussed. Adult stem cells are used for a variety of treatments already including bone marrow transplants and other indications.