What does "peer reviewed" or "refereed" mean?

What does "peer reviewed" or "refereed" mean?

Peer review is the process used by publishers and editors of academic / scholarly journals to ensure that the articles they publish meet the accepted standards of their discipline. Manuscripts being considered for publication are sent to  independent experts in the same field (the author's scholarly or scientific peers). They evaluate the quality of the scholarship, reliability of findings, relevance to the field, appropriateness for the journal, etc. Most, but not all scholarly journals are peer reviewed. 

See also: How can I tell if a journal is peer reviewed or refereed?