The process by which a cell becomes specialized in order to perform a specific function, as in the case of a liver cell, a blood cell, or a neuron. There are more than 250 general types of cells in the human body. Differentiation is the process that takes place inside an embryo that determines which genes are expressed and hence what type of cell will result.
Note: The ability of embryonic stem cells to undergo differentiation into any cell in the body is what makes them a focus of modern research.