Ok, Stable Diffusion is a deep learning text-to-image model developed by StabilityAI and other partners. Its initial release was in August of 2022. Version 2 was released in November 2022. 

Stable Diffusion uses a diffusion model, where noise is added incrementally to an image until the image is just noise and therefore unrecognizable. A neural network model is trained to extract the noise from the noisy images. Then the process is reversed: a random noise image is presented to the noise extractor (now acting as a predictor), and the output is fed back into the predictor. This process is repeated until a recognizable image is generated that has minimal noise.

In this way, the system can generate new images that were not part of the training set yet exhibit features and latent characteristics of the training set. There are many details that cannot be explained precisely in a few sentences; for example there obviously needs to be a way to inject the text prompt into the process. I suggest you google "Stable Diffusion" to find out more.
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