It's a long story...
Briefly, at the end of all long bones
are physes (growth plates) that are composed of columns of cartilage
These columns grow one cell at a time, and cells at the bottom swell and die and become a scaffold for bone formation. It is too complicated to describe in 400 characters, but this might help: http://www.Sophia.Org/bone-development-endochondral-ossification-tutorial.