Obfuscating code is making the code very hard to understand for humans.
This tag indicates that a challenge involves obfuscation. Often, this just means that certain characters can't be used, or that you need to hide what you are doing.
Obfuscating code is making the code very hard to understand for humans, and is much used to protect source code. Most obfuscated codes are obfuscated by computer programs (obfuscators). Unfortunately, obfuscation doesn't provide code protection for 100%, because there is also a lot of software that de-obfuscates the code, and makes the code easier to understand for humans. Humorously, golfing code makes the code harder for humans to read, so it is a form (though very easily reversed) of obfuscation.
More information: Wikipedia: Obfuscation (software)