A change in Buffyverse canon, usually made to expand or reinterpret existing storyline history. For example, "You were my Sire, man, you were my Yoda." Spike's sire is explicitly given as Angelus in season two, but later contradicted in Fool For Love, when we see him turned by Drusilla. (Incidentally, Joss has explained this!)
From the Jargon File, version 3.1.0: :retcon: /ret'kon/ [short for `retroactive continuity', from the USENET newsgroup rec.arts.comics] 1. n. The common situation in pulp fiction (esp. comics or soap operas) where a new story `reveals' things about events in previous stories, usually leaving the `facts' the same (thus preserving continuity) while completely changing their interpretation. For example, revealing that a whole season of "Dallas" was a dream was a retcon. 2. vt. To write such a story about a character or fictitious object. "Byrne has retconned Superman's cape so that it is no longer unbreakable." "Marvelman's old adventures were retconned into synthetic dreams." "Swamp Thing was retconned from a transformed person into a sentient vegetable." "Darth Vader was retconned into Luke Skywalker's father in "The Empire Strikes Back"".
Retroactive Continuity. Claiming that something was always true, and that history is now the way it would have been, had it been true. One method of altering something (usually a character) and maintaining consistency.