Retroactive continuity

The term retcon is a contracted form of the phrase "retroactive continuity". It originated decades ago in the comic-book-collecting community, though its usefulness has proven itself far beyond that medium. It refers to any plot development or revelation that introduces new information about previously-established events, especially if the new information had not been an intended element of the original history.

Being slang, there is no strict definition of what constitutes a retcon; the most liberal usage applies the term to any new backstory introduced with sufficient distance from the original material, be it in terms of time or authorship or both. However, a stricter usage would confine it to developments that change or contradict past events. Thus, for some, "retcon" carries a negative overtone, no doubt due in part to the fact that the term is naturally brought up when people are talking about continuity problems.

Examples
The introduction of the Matrix of Leadership in The Transformers: The Movie is a clunkier retcon. Viewers are asked to accept that Optimus Prime had been carrying the Matrix around with him for the last two years' worth of cartoon episodes. Despite being a cosmically-powerful artifact with monumental importance to Autobot history and culture, it had never been relevant to the plot or even mentioned in passing. Still, the closest thing to a contradiction involved is the handful of views or scans of Prime's interior which had shown no sign of the Matrix. But fans have concocted a number of explanations for this discrepancy, so it is generally viewed as a merely awkward retcon and not an offense to continuity.