Definition and background:
The art of arranging a composition for performance by an instrumental ensemble. Some compositions are originally intended for instrumental ensembles where the composer makes all decisions pertaining to instrument assignments within the score (which instruments play what notes and when they play them). This is often referred to as scoring the composition. Some compositions such as Modest Musorgsky's Pictures at an Exhibition were originally written for a specific instrument (in this case piano) and are later set for a different combination of instruments (in this case Maurice Ravel's orchestration for symphony orchestra). The purpose of orchestration is often to provide a more vivid set of tone colors for a composition or to give a different ensemble of instruments access to the composition. An example would be for a "pops" orchestra to play popular music (originally composed for a Rock n' Roll band) in a concert.
For more information on the music term "Orchestration" check out these other resources:
Wikipedia - Glossary of Musical Terminology
Virginia Tech Multimedia Music Dictionary
ORB -- Medieval Music Glossary