Acupuncture is an internal medical system designed to look at the body as a whole. The meridians and internal organs are linked. Together, they deal with the food you eat, the environment in which you live (hot, cold, humid, dry) and the emotions which dominate (fear, anger, sadness, worry). All these factors will affect your state of health. Each person is also subject to their unique combination of all these factors. On top of that, each of us is born with a different constitution (DNA) which affects the way that disease manifests in the body. 
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Acupuncture uses the meridians and acupuncture points to affect the internal organs. This has an effect on the blood, the immune system, interstitial fluids and general body fluids
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The Chinese used the terms qi, blood and body fluids (over 2000 years ago). 
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Acupuncture basically works by bringing the body's attention to a particular area. This alerts the body to a possible imbalance. The body corrects the problem with its amazing ability to restore function and balance. Acupuncture directs the body to help itself.

This is my theory, based on my 4-year bachelor of health science degree and over 10 of Chinese medicine knowledge. I will try and explain in relatively simple terms.
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You body is programmed to react to foreign bodies entering the skin, bloodstream, mouth, etc. Whether they be bacteria, a virus, or an object. Let’s use an example of standing on a rusty nail. Your body would automatically respond to the puncture wound. That nail may be rusty, dirty, and full of bacteria. The body's natural response is called an inflammatory response. The blood vessel wall in the area, instead of being closed like a pipe, would now open up. This allows a range of cells to enter the area, each with a specific task. Some cells gobble up damaged cells, bacteria, and dirt. Some cells start laying down collagen matrix to repair the skin. Others repair the bone or the tendons. While this is happening, the injury site is swollen red and sore. This is the construction site where all the repairs are done and is a good thing.
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The acupuncture needle mimics the rusty nail in a way, except the needle is sterile and doesn’t cause damage. The acupuncture needle draws those same cells to the area as the rusty nail. So if there is a torn muscle or tendon problem those same cells will go the site and do the repairs. The needles basically guide the body and the body does the actual repair work.