Right now, the bones in your body are undergoing renovation. There are wrecking crews blasting into the bone quarry and carting off debris while an entirely different work crew hauls bags of concrete to the blast site and patches the newly made holes with stronger, newer, better material.
Before we talk about replacing bone with bone, we'd better learn how cartilage turns into bone. When you're floating around in the womb, your developing body is just beginning to take its shape, and it's creating cartilage to do so. Cartilage is a tissue that isn't as hard as bone, but much more flexible and, in some ways, more functional. Cartilage is pretty good stuff to use if you're going to mold a human -- good enough for the finer work, especially, such as your nose or your ear.
A large amount of that fetus cartilage begins transforming into bone, a process called ossification. When ossification occurs, the cartilage (which doesn't have salts or minerals in it) begins to calcify; that is, layers of calcium and phosphate salts begin to accumulate on the cartilage cells. These cells, surrounded by minerals, die off. This leaves small pockets of separation in the soon-to-be-bone cartilage, and tiny blood vessels grow into these cavities. Specialized cells called osteoblasts begin traveling into the developing bone by way of these blood vessels. These cells produce a substance consisting of collagen fibers and they also aid in the collection of calcium, which is deposited along this fibrous substance. (One common analogy for this design is reinforced concrete, which is a grid of metal rods covered with concrete mix.)
After a while, the osteoblasts themselves become part of the mix, turning into lower-functioning osteocytes, sort of a retired version of osteoblasts that continue to putter along but don't stray too far from the blood vessels. This osteocyte network helps form the spongelike lattice of cancellous bone. Cancellous bone isn't soft, but it does look spongy. Its spaces help transfer the stress of external pressures throughout the bone, and these spaces also contain marrow. Little channels called canaliculi run all throughout the calcified portions of the bone, enabling nutrients, gases and waste to make their way through.
But we're not through with the bone-growing process yet.