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Background

Transgender is a general term applied to a variety of individuals, behaviors, and groups involving tendencies to vary from culturally conventional gender roles.

Transgender is the state of one's "gender identity" (self-identification as woman, man, neither or both) not matching one's "assigned sex" (identification by others as male, female or intersex based on physical/genetic sex). "Transgender" does not imply any specific form of sexual orientation; transgender people may identify as heterosexual, homosexual, bisexual, pansexual, polysexual, or asexual; some may consider conventional sexual orientation labels inadequate or inapplicable to them. The precise definition for transgender remains in flux, but includes:

    "Of, relating to, or designating a person whose identity does not conform unambiguously to conventional notions of male or female gender roles, but combines or moves between these."
    "People who were assigned a sex, usually at birth and based on their genitals, but who feel that this is a false or incomplete description of themselves."
    "Non-identification with, or non-presentation as, the sex (and assumed gender) one was assigned at birth."

A transgender individual may have characteristics that are normally associated with a particular gender, identify elsewhere on the traditional gender continuum, or exist outside of it as "other", "agender", "Genderqueer", or "third gender". Transgender people may also identify as bigender, or along several places on either the traditional transgender continuum, or the more encompassing continuums which have been developed in response to the significantly more detailed studies done in recent years.

Reference: http://wikipedia