There are three mechanisms of bone formation that underlie the use of the different types of implants. In osteogenesis, viable osteoblasts and preosteoblasts are transplanted from one part of the body to the site where new bone is needed; cancellous marrow grafts are an example of such osteogenic engraftment. In osteoconduction, the implant does not provide many viable cells but rather acts as a scaffolding for the ingrowth of new bone from the margins of the defect with the concurrent resorption of the implant; cortical bone grafts or banked bone segments are examples of this "creeping substitution." In osteoinduction, the implant stimulates the transformation of connective tissue to produce endochondral bone, even in extraskeletal sites; demineralized bone implants promote bone formation by osteoinduction. The physiology, cell biology, biochemistry, and endocrinologic regulation of induced osteogenesis are areas of active investigation. Fresh autogenous cancellous bone grafts are preferred for non-stress-bearing defects, but are often of limited availability for extensive procedures, especially in infants. Demineralized bone implants have been used successfully in certain types of craniomaxillofacial, orthopedic, periodontal, and hand reconstruction. Tissue transformation may become as important to reconstructive surgery as is tissue transplantation.