You mostly hear this term around patching time because then skills and classes get modified. A nerf is when a skill gets modified but in a negative way.
I got this following text from another forum!
Nerf - Traditionally, a soft foam toy that is a replica of an actual item that is not made from foam. In this game nerf refers to the reduction in damage and efficiency of a particular classes' skill to seemingly address balance issues. ex. "They really nerfed archers again."