If all nuclei in an organism contain the same genetic information (as we know they do), then how does differentiation occur? The explanation for this is found in the Theory of Differential Gene Expression. This theory states that differentiation occurs as a result of expression in a particular cell of only a subset of the total genes present. For example, if a cell expresses only the set of genes that causes muscle differentiation, then that cell will differentiate into a muscle cell. Alternatively, if the cell expresses only the set of genes that causes spleen cell differentiation, then the cell will differentiate into a spleen cell.
This is a fairly simple concept, but it hasn't really answered the question. The question has now become: how do cells activate only a certain set of genes (inactivating all other genes), and how do they know which set of genes to activate? The answer to this question is fairly straightforward as well: the set of genes activated in a cell is dependent on the set of transcription factors found in the cell. (For a discussion of transcription factors, see the module on Eukaryotic Gene Regulation.) Using the muscle cell example from above, the cell activates the muscle-specific genes because it contains transcription factors that specifically activate the muscle-specific genes.
If you think about this for a minute, you'll realize that we still haven't answered the question; we've only changed it again. Now the question becomes: how did the cell come to contain only that specific set of transcription factors? Well, those transcription factors are encoded by genes, and those genes are regulated by other specific transcription factors. Those transcription factors are in turn encoded by other genes, which are regulated by still other transcription factors, etc. 
As you can see, there is a hierarchy of genes within each cell. Genes are expressed that encode transcription factors, which activate other genes that encode transcription factors, which activate other genes that bring about differentiation along a specific pathway. How many levels are there to the hierarchy? From what we've seen so far, the hierarchy seems to go on forever. Each set of transcription factors is encoded by genes that are activated by yet another set of transcription factors. It must end somewhere, but where?
Master Control Genes
In one sense, it ends with master control genes. A master control gene is the first gene activated in a hierarchy that leads to differentiation along a particular pathway. Master control genes encode the first transcription factor in a hierarchy; a master control gene product activates the next set of genes that encodes the next set of transcription factors, and the cascade of gene expression has been set in motion.
Let's look again at the muscle cell example considered earlier. The master control 'gene' for muscle development is actually a family of genes called the MyoD gene family. These genes encode HLH-type transcription factors. How do we know these are the master control genes for muscle? Master control genes have a particular property. Because they initiate muscle differentiation, if the MyoD genes are activated in other cell types, they cause those cells to transdifferentiate into muscle. For example, hepatocytes (liver cells) or adipocytes (fat cells) that are caused to express the MyoD genes (using tricks of molecular biology) will change from their normal phenotype into muscle cells.
So how are the master control genes regulated? There are two basic ways that this can happen. One way is through the process of induction. Induction occurs when once cell sends a signal to another cell, telling it to differentiate a certain way. The signal, usually a diffusable protein, causes the recipient cell to activate the appropriate master control gene product. This is how muscle differentiation occurs. Signals from other cells cause the MyoD genes to become active in the cells receiving the signal, and muscle differentiation is initiated.
The inducing cell (the one that sends the signal) is itself a differentiated phenotype. How did it differentiate in this way? Well, it might have been induced itself (Oh, no, another regulatory hierarchy!), or it might have differentiated because its master control gene products were produced by the second type of regulation. In this method, a cell just 'knows' what to differentiate into. This is known as autonomous regulation. (Differentiation of epidermal cells of the skin is regulated this way.) How does a cell know what to differentiate into? In most cases it is because the cell inherits a 'determinant' that causes it to differentiate along a particular pathway. These determinants are generally mRNA molecules that encode transcription factors (i.e. master control gene products), and that are produced during oogenesis and stored in localized regions in the egg. Such determinants would therefore be unequally inherited by offspring cells during cell division in the embryo. Does this idea sound familiar? It should: it's very much like the mosaic theory we discussed earlier! In this case, however, it's not genes that are divided up unequally between cells, it's the mRNA molecules produced by certain genes. So it turns out that Roux and Weismann, while wrong about genes, were close to the mark with their general idea.
Developmental Genetics: Summary of Key Points
- Developmental biology is concerned with finding out how cells differentiate (become specialized) during embryonic development.
- Two theories have been proposed to explain differentiation. The mosaic theory proposed that genes are divided up unequally between cells during development; this theory has been disproved. The theory of differential gene expression states that cells differentiate according to which subset of their total complement of genes is expressed.
- Master control genes are genes that initiate differentiation pathways. These genes encode transcription factors that activate a cascade of gene expression resulting in differentiation.
- Master control genes can be activated by induction (a signal from another cell) or by autonomous regulation (inheritance of a determinant - usually an mRNA that encodes a master control gene product).