For me, refactoring means improving your code or design without breaking its existing functionality. Basically when required, you give out a quick and immediate solution but immediately "refactor" it to make it better for the long run.
Martin Fowler seems to have good ideas about this. Check out his bliki.
Some more links related to refactoring:
http://www.refactoring.com/sources.html
http://www.extremeprogramming.org/rules/refactor.html