MS affects the central nervous system (CNS), which is a collective term for the brain and the spinal cord. The CNS contains nerve cells (neurons) and glial cells, which are different types of supportive cells that ensure the normal functioning and communication of the neurons. A typical neuron is composed of a cell body carrying dendrites, and a long extension called an axon. Dendrites are short protrusions that connect to immediately neighbouring neurons, while axons connect the neuron to more distant parts of the CNS. To ensure high velocities of signal conduction, axons may be sheathed in a fatty insulating substance called myelin (see picture, below)

Myelin is wrapped around the axon in building blocks interrupted by distinct gaps, called Ranvier's nodes. The fatty myelin sheaths allow the electric nerve signals jump from one node to the next. This is called saltatory conduction and is the basis of rapid nerve conduction. The high content of fat gives myelin its whitish appearance.
The presence or absence of myelin also separates the brain into two regions: the outer grey matter containing neurons with interconnecting dendrites and the inner white matter mainly consisting of tracts of myelinated axons.
Demyelination
In MS, inflammatory processes damage or destroy the myelin sheaths of nerve cells. This loss of the myelin sheath is known as demyelination. Areas of demyelination are called ‘lesions’ or ‘plaques’, which become apparent when the myelin is stripped off or thinned on many axons in a region. The lesions predominantly affect the white matter; hence MS is termed a ‘white matter disease’.
Axons that lack myelin can no longer conduct electrical signals properly, which translates into the neurological symptoms typically experienced during a MS attack or disease relapse. As the CNS regions of demyelination are unpredictable, the nature of associated neurological deficits varies considerably.
Neurodegeneration
Once the inflammation has subsided, damaged myelin may be replaced leading to restoration of neurological function as illustrated by the transient nature of an MS attack. However, in cases of severe and prolonged demyelination, neurons may be destroyed before the protective myelin coating can be re-established.
The illustration below shows the formation and development of plaque.

Degenerated neurons and axonal tracts are replaced by scar tissue, which does not serve any neurological function. In these cases, neurodegeneration may cause persistent neurological deficits.