Customer returns are items returned to the retailer because the customer changed their mind, the item was faulty, or exchanged for a different item. Customer returned items often end up as part of liquidation and closeout lots.
When drop shipping, customer returns are handled either by your drop ship supplier's policy (may include fees such as for restocking, and return shipping), or by the retailer's preference which should comply with their terms and conditions. To find out more, there's a guide here on handling customer returns when drop shipping.
Many online retailers purchase customer returns as a way to get cut-price deals that can be resold for a profit. As with all forms of product sourcing, when buying customer returned items, you must first determine whether there is a keen buyer market for the products. If you fail to do your due diligence, you may end up purchasing stock that you can't sell, let alone sell for a profit.