The process of gene targeting involves two steps.

Capecchi and Smithies discovered that homologous
recombination could be used to specifically modify
genes in mammalian cells.

Evans identified and isolated embryonic stem cells
(ES cells) from early mouse embryos (blastocysts).
He also showed that ES cells can be used as vehicles
to transmit genetic information in mice.

Genes altered in vitro can thus be passed on to future
generations.