How does an embryo know where to grow limbs etc
You may want to look into "Evolutionary - Developmental Biology", which deals with how an embryo develops into a grown organism.


  Thus, by combinatorial specifying the identity of particular body
  regions, Hox genes determine where limbs and other body segments will
  grow in a developing embryo or larva. A paragon of a toolbox gene is
  Pax6/eyeless, which controls eye formation in all animals. It has been
  found to produce eyes in mice and Drosophila, even if mouse
  Pax6/eyeless was expressed in Drosophila.


In short, there's a sequence of gene activations that progressively map body into different regions. At first, there are just 3 regions (head, body, tail), then these get broken down into more and more finely defined sections. 

You can think of these sections as GPS coordinates for the body. A gene combination at a certain point means that a limb will grow there. 

You can look into "Sonic Hedgehog" gene, which allowed scientists to produce fuzzy growth on a fruit fly head. 

The most interesting thing is that every living creature is mapped/built using the same toolbox of genes. The genes that define where a fruit fly wing is also define where a human arm is.