Refactoring is a technique to clean up and improve the design of existing code without changing its external behavior. It involves simplifying code by removing duplicate code, extracting logic into well-named methods and variables, and restructuring code to make it more readable and maintainable. The document recommends practicing small refactorings, using refactoring tools in IDEs, and pairing refactoring with test-driven development to improve code quality over time without introducing bugs.