Every domain has a expiry date and if the owner of a register domain name does not renew his or her domain then it will be auctioned by the registrar. If no one buys even after 30 days of the domain expiry then it will be dropped and it is similar to a new domain name but with backlinks good for seo. These are called dropped domains and the domains which are registered within that 30 day period of back order are called non dropped domains.
If you want to buy non dropped PR domains with high PR for selling links, make sure that the domains will be purchased within 30 days after the domains expired. For preventing the PR down.
The term refers to basically an expired domain. So a dropped domain would be one where the owner did not renew but at some point later on a new buyer came and snatched it up, also the site generally now has different content as well. If you buy a dropped domain quickly enough and make sure to do proper onsite SEO (get the original or close the original content back on there) then you stand a good chance of preserving the PR it had before it was left to expire. If you wait a while or buy it and throw all new content on it chances are your PR will fluctuate at the next update.