Retcon is a contraction of the term "retroactive continuity." It describes the act of changing previously-established details of a fictional setting without providing an explanation within the context of the setting for the changes.
Retconning is common within the fictional universes of comic books, especially those of large comic book houses such as Marvel Comics and D.C. Comics, due to the long periods of time and the large number of independant authors contributing to their development. An example of a comic book retcon is the status of Superman's adoptive human parents, the Kents; they were originally established to have died, but later comics rewrote history so that they hadn't. Retconning can be found in other media as well; a prime example is the Star Trek franchise, which has been produced over many decades and with multiple writers and producers.
Another form of retconning doesn't directly contradict previously-established facts, but instead retroactively "fills in" missing background details necessary for current plot points.
Retroactive continuity is similar to but not exactly the same as plot inconsistencies introduced inadvertantly; retconning is usually done deliberately, and is often accepted at face value by fans if it is done well.