Ever since work on pluripotency induction was originally published, reporting the reprogramming of somatic cells to induced pluripotent stem cells (iPS cells) by the ectopic expression of the four transcription factors Oct4, Sox2, Klf4 and c-Myc, high expectations regarding their potential use for regenerative medicine have emerged. Very recently, the direct conversion of fibroblasts into functional neurons with no prior pluripotent stage has been described. Interconversion between adult cells from ontogenically different lineages by an induced transdifferentiation process based on the overexpression of a cocktail of transcription factors, while avoiding transition through an embryonic stem cell-like state, provides a new impetus in the field of regenerative medicine. Here, we review the induced reprogramming of somatic cells with defined factors and analyze their potential clinical use. Beginning with induced pluripotency, we summarize the initial objections including their extremely low efficiency and the risk of tumor generation. We also review recent reports describing iPS cells' capacity to generate viable offspring through tetraploid complementation, the most restrictive pluripotency criterion. Finally, we explore the available evidence for 'induced transdifferentiated cells' as a novel tool for adult cell fate modification.