If you had a metal sword, and then someone replaced it with a sword made out of Nerf (TM), you'd have a much less effective weapon. Some people think that some of the 3.5 changes are reducing certain character classes or spells or feats in power so much that they're essentially worthless.
"Nerfing" basically means reducing the power of a spell, class, or race.
For instance, bull's strength was "nerfed" because 3.5 reduces the duration from 1 hour/level to 1 minute/level.
As far as WHY we call it "nerfing", it comes from the concept of the "Nerf" brand footballs or baseballs - the company basically took something that was hard and made it soft (so kids wouldn't get hurt). Hope this makes sense.
Down with NERFING! Up with the HOG (Haters of Gnomes)!!!! Thanks, it does make a lot of sense now. I cant believe that disinergrate got nerfed that bad.......what about Finger of Death?