Bone cancer occurs when a tumor, or abnormal mass of tissue, forms in a bone. A tumor may be malignant, that is growing aggressively and spreading to other parts of the body. A malignant tumor is often referred to as cancerous. Stage ll: Cancer has not spread but may become invasive (a threat to other tissue). 2  Stage lll: Cancer has spread to one or more areas of the bone and is invasive. 3  Stage lV: Cancer has spread to the tissues surrounding the bone and to other organs such as the lungs or brain.