Adjustment of Status is the transformation from temporary to permanent status while inside of the United States.  This benefit is only available to certain foreign nationals. Those who are ineligible to adjust status inside of the United States may be eligible to apply for an immigrant visa at a US consulate or embassy outside of the United States.
 

It is very important before deciding whether to adjust status or consular process to determine whether the foreign national will be subject to the three or ten year bar to reentry if she departs the United States.  For a discussion of the three and ten year bars, click here.

To be eligible to adjust status (subject to some exceptions), you must:

1. Have entered the United States legally
2. An immigrant visa must be available to you now (which means your priority date must be current, or you must be the beneficiary of a petition that is not subject to a quota)
3. You must have never worked without permission in the United States (even one day of unauthorized work will disqualify you)
4. You must not have violated your nonimmigrant or parolee status since your last lawful admission to the United States
5. You cannot have been admitted in C, S, K, or J status (K status is acceptable if you are adjusting based on your marriage to the K-1 petitioner)
6. You were not admitted to the United States under the visa waiver program (those given green "I-94W" cards at admission instead of white "I-94" cards)
7. You are not subject to any of the ten categories of inadmissibility

exceptions to the rule

Technical Status Violations and Status Violations Outside the Control of the Applicant: Technical violations of status or violations of status caused by an agency or representative, or due to circumstances that the applicant has no control over do not bar adjustment of status.  INA 245(c).

Immediate Relatives of US Citizens: The spouse, parent and children under age 21 of US citizens are not barred from adjusting status even if they violated their nonimmigrant or parole status and worked without authorization in the United States.  INA § 245(c)(2).  And they are not barred from adjusting status if they entered on a visa waiver.  INA § 245(c)(4).  So the spouse, parent and minor children of a US citizen may adjust status in the United States even if they, for example, overstayed, or worked without authorization -- even for many years.  However, these immediate relatives are subject to all of the other adjustment of status requirements and cannot adjust status, for example, if they entered the United States without permission.

Employment-Based Adjustment Applicants: Employment-based applicants to adjust status qualify even if they violated nonimmigrant or parole status, or worked without authorization for up to 180 days in total since their last lawful admission to the United States.  8 U.S.C. §1255(k).  This rule is strict and 181 or more days violating status, or working without authorization will disqualify an employment-based applicant.  The 180 days includes all types of status violations so 179 days of working without authorization and two days overstaying a visa together equal 181 days of status violations and thus exceed the exception of 8 U.S.C. §1255(k).  Partial days working even for a few hours count as a full day status violation against the 180 days.  See Adjudicator's Field Manual 23.5(d)(4)(B).

T and U Visa Holders: Holders of T and U status obtain permanent status in the United States under other statutes and not INA 245(a) or 245(c) and are thus not subject to the requirements listed in INS 245.

Curious how USCIS processing I-485 applications to adjust status?  Read the 241 page Standard Operating Procedures (SOP) that USCIS adjudications officers use to process adjustment of status cases.