Uhh, no offense but that is one crappy description.
Most often it refers to the CPU's clockspeed. Overclocking is exactly what is says. For example, the stock clockspeed of say a Phenom II 955 cpu is 3.2ghz. Overclocking is simply an increase of that clockspeed. Taking it to say 3.4ghz would be a small overclock.
This is past taking anything past it's ''limits'', but rather taking it to more than it's stock speed. A small overclock does not shorten the lifespan (unless you take it super seriously and say it will last 8 years instead of 9 or something like that, in which case it will be completely obsolete at that point anyway) nor does it really void any warranty because there's no way to prove you overclocked the CPU. Besides that, a lot of current AMD cpu's are Black Editions with an unlocked multiplier specifically meant for overclocking. Increased heat will only be a couple degrees if you do not increase the voltage going to the CPU.