Let me confuse you, the reader, regarding the complexity of this treatment and how stem cell technology is being studied now. I will be brief and expect that the reader that chooses to learn more will explore the topic further.
Stem cells, or MSCs (for mesenchymal stem cells) for use in the knee may be derived from bone marrow, adipose tissue or synovium. Chondrogenic potential (the ability to become normal joint surface tissue) differs depending on tissue origin. Bone marrow MSCs tend to become mineralized (hardened like bone) if exposed to the the wrong stimulus. Bone marrow and Adipose derived MSCs require different biologic signals to start them growing into articular cells. Biochemical signals such as different growth factors with names like TGF-ß, BMP-6, and fibroblast growth factor-2 are required to signal the cell to start growing into an articular cartilage cell. The amount of oxygen in the environment has a significant effect - the less oxygen the better. The time at which load is applied to the cells - load must be applied just after the beginning of chondrogenesis to keep the cells growing properly. Structure matters - a specific design and manufacturing of the tissue scaffold in to which the cells are placed must be used to direct the cells into the proper 3 dimensional form. These scaffolds are so called biomimetric design attempting to replicate the natural architecture. Lastly, acellular matrices infused with TGF-ß that deliver biologic cues to encourage endogenous stem cells from within the joint (synovium origin) has held promise in an animal model. A review on this subject can be found in the January issue of Journal of AAOS.