A refurbished phone has been through a refurbishment process. It may have been through this process for various reasons.
Firstly, it may have been used as a display model in a store, such as an iPhone in an Apple Store. When it is no longer needed in the store, it will go to a factory to be refurbished and then sold as refurbished to a customer.
Also, sometimes customers buy a product but decide that they don’t want it. In this case, they may return it to the place of purchase within the free returns window (often 30 days). The returned phone cannot be re-sold as a new device, since it has technically been used. So it will go through the refurbishment process, and will then be sold as a refurbished device.
Another reason for a customer returning their phone is if it has a defect. Maybe the battery was faulty, or there could have been a problem with the antenna. Whatever the issue, a customer may choose to return it to the place they bought it, in expectation of getting it fixed. However, in many cases, it is easier for companies to give the customer a replacement phone, and take in their broken phone to be fixed at a later date. When this phone is ‘fixed at a later date’, it will actually be sent to be refurbished, and then sold as a refurbished phone.
The final main reason for a phone entering the refurbishment process is simply when a phone user doesn’t want their phone anymore. Rather than sell it to a friend, or via a platform like eBay, they can trade it in for a new one, or simply sell it to a company that buys used phones. Either way, the phone will be refurbished, and later sold as a refurbished phone.