(1) To convert from one format to another. It implies conversion between very distinct kinds of data, such as from speech into text or from analog video into digital frames. Sometimes the term is used as nothing more than a fancier synonym for "convert." See transpiler.
(2) To convert from one compressed audio or video format to another; for example, from MP3 to Ogg Vorbis. Converting lossy formats, such as MP3, to another lossy format may degrade quality considerably. See FLAC, MP3 and Ogg Vorbis.