A state transition diagram shows each state as a location, and the transitions between them as arrows. Each arrow is labelled with the reason for the state transition. The state of the system can be followed as different stimuli arrive because the same stimulus may have different effects according to the state the system is in at the time it arrives. One or more actions may be associated with each transition.

STDs are ideal for describing the behaviour of a single object. They are also formal, so tools can be built which can execute them. Their biggest limitation is that they are not good at describing behaviour that involves several objects. For example, the image below represents a machine in a bottling plant filling bottles. The bottle begins in an empty state. In that state it can receive 'squirt of liquid' events.

If the squirt event causes the bottle to become full, then it transitions to the full state, otherwise it stays in the empty state (indicated by the transition back to its own state). When in the full state the cap event will cause it to transition to the sealed state. The diagram indicated that a full bottle does not receive squirt events, and that an empty bottle does not receive cap events.