In the study of stem cells, the term "plasticity" refers to the capacity of stem cells in a particular tissue to display a phenotypic potential that extends beyond the differentiated cell phenotypes of their resident tissue. This basically means that stem cells are considered to have higher plasticity if they have the ability to generate other cell types, different from the one they currently reside in.
To understand this particular property of stem cells we need to learn about embryonic development. The human embryo in its early stages reaches a particular stage where the number of cells created through repeated multiplication is enough to divide them into there distinct layers - The ectoderm (which gives rise to the skin and neural cell lineages), the mesoderm (which possibly generates the blood, bone, muscle, cartilage, and fat tissues), and the endoderm (which contributes towards tissues of the respiratory and digestive tracts). Along with the cells assigned to each lineage undergo genetic modifications that commit them to their specific roles throughout adulthood which include mature cells, progenitor cells as well as stem cells (with very few exceptions, for example, neural crest cells). This is done in order to ensure that the cells do not cross tissue boundaries and maintain the body's homeostatic requirements. However recent experiments have shown that under certain circumstances the stem cells although committed to a particular lineage are able to differentiate into a variety of other cell types.
Originally it was believed that stem cells found in a particular tissue can only renew and differentiate into lineages of the tissue it resides in. But this statement has been disputed and it has been confirmed that tissue-specific stem cells have substantial plasticity and can propagate into cell types belonging to other lineages by overcoming the cross-lineage boundary and also lose their tissue-specific surface markers as well as functions. This property is also known as transdifferentiation. They are able to acquire the surface markers and functions of tissues they did not originally belong to. Many experiments have been conducted previously where scientists have been able to induce adult stem cells to propagate into cells of tissues they weren't originally isolated from such as brain stem cells that differentiate into blood cells or blood-forming cells that are able to give rise to muscle cells etc.
This has also prompted scientists to look into the matter of embryonic development wherein the splitting of germ layers may not be as clear cut as it was supposed to be. It has also opened the gates to potential research in the field of regenerative therapy.
The mechanism by which the adult stem cells undergo transdifferentiation and have different levels of plasticity is highly variable. It may be due to the changes in the microenvironment, dormant differentiation programs, injury, presence of specific chemicals, etc. The above diagram shows potential mechanisms and pathways for adult stem cell plasticity with Tissue-specific stem cells represented by orange or green circles, pluripotent stem cells represented by blue ovals, and differentiated cells of the “orange” lineage by red circles and of the “green” lineage by green hexagons.