What does manufacturer refurbished mean?

When a product is marked as 'manufacturer refurbished', it means that it has been refurbished by its manufacturer and not by a retailer. For instance, an Apple MacBook could be refurbished by the Apple Store (manufacturer refurbished) or by an independent seller like Mac of All Trades (retailer refurbished). 

The refurbishment process entails:

• functional testing of hardware and software
• cosmetic evaluation (Excellent, Good and Fair)
• troubleshooting
• repairs or replacements
• full functional testing

There are no major differences between a retailer's refurbishment process and a manufacturer's refurbishment process. The only differences you may notice when buying a manufacturer refurbished product are:

• An Apple refurb is usually more expensive than a retailer refurb.
• An Apple refurb comes in its official packaging and includes any extra accessory usually included with a new product (e.g. iPhones come with earphones). 
• An Apple Store refurb is exclusively sold in excellent cosmetic condition. Retailers can also sell refurbished products which show signs of previous use, so-called grade B and grade C products. These are cheaper. 
• You can purchase an AppleCare warranty extension only when you buy a refurbished product from Apple. However, lots of retailers also offer their own warranty extension option.