The neural tube — from which your baby's brain, spinal cord, nerves, and backbone will sprout — is starting to develop in the top layer, called the ectoderm. This layer will also give rise to his skin, hair, nails, mammary and sweat glands, and tooth enamel.
His heart and circulatory system begin to form in the middle layer, or mesoderm. (This week, in fact, his tiny heart begins to divide into chambers and beat and pump blood.) The mesoderm will also form your baby's muscles, cartilage, bone, and subcutaneous (under skin) tissue.
The third layer, or endoderm, will house his lungs, intestines, and rudimentary urinary system, as well as his thyroid, liver, and pancreas. In the meantime, the primitive placenta and umbilical cord, which deliver nourishment and oxygen to your baby, are already on the job. (From Baby Center)