Thanks for the thoughtful question. The first thing to know about acupuncture is that it is simply a tool. It is not, in and of itself, the medicine. The limits of what it can be used to treat are simply the limits of the practitioner's understanding and/or skill.
Acupuncture is usually only one aspect of a Chinese medicine treatment. It may be the primary tool utilized, or it may be a very small part of the overall treatment. They key in Chinese medicine is to understand the relationships between the structures and forces within the body and mind, as well as between the individual and the external environment. Once the practitioner has a detailed understanding of these, they may utilize a combination of any number of modalities to address the issue(s) and restore balance.
I will provide you with a couple of specific examples that may further your understanding:
1) A 22-year-old college gymnast presents with a strained achilles tendon. Upon examination, it becomes clear that their hamstrings and calf muscles are incredibly tight. In particular, there are a number of muscle fibers that have become locked in a very rope-like or string-like state. We can fee how these tight lines pull directly on the achilles, placing a constant strain on its insertion into the heel. In this case, I would use acupuncture to release the tight lines by needling directly into the knotted muscles, thereby causing them to fasciculate and release. I would also like needle into the space between the muscles in order to manipulate the connective tissue associated with that same line, likely pulling toward the heel in order to further relieve the pull on the tendon. A number of other modalities would then be utilized (including topical liniments, foot soaks, range-of-motion exercises, and massage) to round off the session and promote healing.
2) A 63-year-old presents with chronic diarrhea that is worse when she eats raw food or cold food. She tends to wears warm clothing, even when in a room in which others are quite warm. She rarely experiences thirst, has little appetite and low energy. In this case, needles would be used at acupuncture points (also referred to as "holes" because these defined points are typically in the spaces between structures - as differentiated form the above example, in which we were needling directly into muscle knots, etc) that are best used for warming and encouraging digestion. Once inserted, needles would be manipulated in a fashion that would create systemic warming sensations and a feeling of movement in the gut. This is a very different (and much more pleasant) technique than the kinds used to treat physical injuries in a robust individual. The treatment would likely be combined with warming hand techniques and/or moxibustion (the burning of mugwort on or above the body to promote warming and the movement of qi). Warm, nourishing, and digestion-promoting herbs would also be used internally to strengthen the individual from the inside.
From these examples, you can see how needles can be used very differently for different kind of illnesses. If you would like to discuss this further, don't hesitate to contact me.