Refers to an image file that is posted in a lossless image format, but contains degradation from having once been a lossy image format file. Often this refers to a PNG image (filetype:png) full of JPEG degradation, because it was once originally a JPEG.
Uploading such pictures is heavily discouraged when the original is available, since converting a JPEG or other lossy image format to a lossless picture format like BMP or PNG does nothing to improve picture quality and creates inconvenience by making the file pointlessly huge. In addition to that, there is a chance someone might take the degraded image, further degrade it by compressing it again into a JPEG file, and post it elsewhere.
It is Danbooru policy to delete third-party lossy-lossless images when the original is available. See third-party edit. Note that this only applies to images that are identical, not to stitches that preserve quality despite the excess filesize (post #2824323, for example).