In competitive bidding, the idea that since some buyers will underestimate the value of an item and others will overestimate it, the high bidder will usually be one of the people that overestimated. Therefore there is a good chance that the 'winner' paid too much for the item.

That a winner of an auction may have overestimated the value of the good auctioned. "The winner's curse arises in an auction when the good being sold has a common value to all the bidders (such as an oil field) and each bidder has a privately known unbiased estimate of the value of the good (such as from a geologist's report): the winning bidder [may] be the one who most overestimated the value of the good; this bidder's estimate itself may be unbiased but the estimate conditional on the knowledge that it is the highest of n unbiased estimates is not." -- Gibbons and Katz Source: econterms

The winner's curse is a phenomenon akin to a Pyrrhic victory that occurs in common value auctions with incomplete information. In short, the winner's curse says that in such an auction, the winner will tend to overpay. However, an actual overpayment will generally occur only if a bidder fails to account for the winner's curse when bidding.