A telefrag is an event that happens when a character (although this can be something else) suddenly appears at a spot already occupied by another character, usually through teleportation. Because it is physically impossible for two bodies to exist at the same place at the same time, the character that was on that spot first will instantly explode, comparable to being hit with an Instagib rifle.
The most likely reason for telefragging happening in the Unreal universe is a Tournament competitors occupying the same space as a Translocator destination module. Purposely launching the destination module at enemy players with the intent of telefragging them is a popular tactic. Attempting to teleport to a damaged destination module has the same result.
Another reason is a player immediately following another through one of the teleporters featured on some maps. Deployables such as the Force Wall that are placed on top of players have a similar effect.
Telefragging can also occur when killed players or bots respawn in locations already occupied by other players, or in single player Unreal when combating a teleporting Skaarj Queen.
To avoid telefragging, vehicles in gametypes such as Onslaught will delay spawning if a player is in their spawn point.
Telefragging features in many other games, including those in the Doom and Quake series.