It is an historical term, that comes up related to the inquisition. As with most accusations of witch craft, it was a charge leveled against someone who was an outsider for some reason, and who thus could be an easy scapegoat.
In fantasy literature, Hedge Wizard has come to mean an untutored wizard, not unlike an adept. Sometimes they might have some psionic powers thrown in as well as minor druid-like abilities. I think with a bit of work, one could cobble together an interesting PC class out of it. I'd include a bit of healing, some earth, air, fire and water related spells, the ability to charm animals and possibly plants, and a bit of psionics. (I own the psionic's handbook but have never read it, so I have no clue how those rules work. Can you even give a character 'minor' psionic abilities? Or would you need to use scrying?) I don't think a hedge wizard should be literate by default.