Final answer:
Cells differentiate by expressing different genes through the regulation of transcription factors, not by gaining or losing DNA. This selective gene expression determines each cell's specialized functions and characteristics without altering the original genome.
Step-by-step explanation:
During the process of differentiation, cells express different genes in response to cell signalling. Cells go through major changes in size, shape, metabolic activity, and function, but do not lose or gain genes. Instead, they selectively 'read' their DNA to exhibit specific gene expressions that lead to their specialized functions. All cells originate from a single fertilized egg and contain the exact same genome. Different cell types arise because they express different sets of genes, controlled by transcription factors.
These factors bind to specific DNA sequences and regulate the transcription of genes, allowing cells to differentiate into various cell types within the body with unique morphological and physiological characteristics. Embryonic stem cells within the germ layers are influenced by their environment to express particular genes crucial for their development into specialized cells.