Retagging in the broadest sense is changing a specific tag from one to another, i.e. changing node to node.js.
Retagging occurs every time someone changes the tags on a post - but it is more commonly used to mean a mass retagging. This occurs when a tag is not used properly and the community needs to clean it up.
There is another process, tag synonymization, which also retags future posts from one to a new tag. This is slightly different, though, as it is an automatic process.
Retagging takes edit privileges, and is accessible through the edit button (just change the tags). However, 10K+ users have a dedicated "edit tags" button.