Adina's already given you the link for what are the accepted definitions on this forum - it's most common use is as an umbrella term that encompasses all aspects of behaviour that seems to contradict the birth gender of the individual. Google have a new, short definition that I haven't seen before but is simple and I think catches it:

denoting or relating to a person whose self-identity does not conform unambiguously to conventional notions of male or female gender.
So, for example, I am a crossdresser who occasionally presents with a female look and although I don't think or feel that I am a woman, I am happy to be considered as part of the transgender family because, when dressed, my projected identity is clearly rather ambiguous. But I have no desire or need to go further than presentation. Not all CDers like to be thought of as TG, largely because of it's misuse... that's their choice. Personally I think that anyone who dresses the way that we do and then proclaims their gender identity as being completely normal needs to take a good, hard look in the mirror... preferably when crossdressed..

I think it's most common misuse is that transgender = transsexual and is a common misconception, largely thanks to the stoopid media who have to dumb everything down to soundbites and bottom of screen ticker tape. Personally, I believe this is a complex condition and can't just be dismissed as 'fun' or 'fetish' - we breach too many societal rules and risk stigma for that to be true... but you can draw your own conclusions - you'll probably get as many opinions as replies to this one...

Oh, and don't mix sexual preference in with gender presentation either - we're quite a mix there too with an apparent hetero majority.

Keep reading and learning...

Katey x