According to the National Institute of Neurological Disorders and Stroke (NINDS), RSD is "a chronic pain condition that is believed to be the result of dysfunction in the central or peripheral nervous systems." According to MedicineNet, RSD involves "irritation and abnormal excitation of nervous tissue, leading to abnormal impulses along nerves that affect blood vessels and skin."
Animal studies indicate that norepinephrine, a catecholamine released from sympathetic nerves, acquires the capacity to activate pain pathways after tissue or nerve injury, resulting in RSD. Another theory suggests that RSD, which follows an injury, is caused by triggering an immune response and symptoms associated with inflammation (redness, warmth, swelling). RSD is not thought to have a single cause, but rather multiple causes producing similar symptoms.
http://arthritis.about.com/od/rsd/a/rsd.htm