STM stands for Stepper Motor.
In June 2012 Canon introduced a new lens motor design to address the issue of lens noise when shooting movies with an EOS DSLR camera. Called a Stepper Motor, it converts digital pulses into mechanical rotation. A complete rotation of the shaft is divided into a large number of small steps. Each pulse rotates the shaft by one step and the position of the shaft can be controlled without the need for any feedback mechanism. A large number of digital pulses give a smooth rotation of the shaft.
There are two types of STM in Canon lenses – lead-screw-type and gear-type. The lead-screw-type is super-quick and super-silent, whilst the gear-type is designed for compactness, to work in much smaller lenses. The gear-type does still produce a low level of residual noise, as a result of the gears which are doing the work.