A rebuilt transmission is one where the transmission is disassembled and inspected, worn or damaged parts are replaced (generally referred to as “hard parts”) and then reassembled to factory specifications, along with new gaskets, seals, clutches and bands. These are commonly referred to as “soft parts”.
The term “rebuilt” is generally used in a shop setting where the customer’s transmission is rebuilt. It is a custom process performed by a specialist. Other terms you may hear that have the same meaning are “refurbished, reconditioned or overhauled”, they have the same meaning.