Powergaming is gaming with the intent of playing a powerful, effective character.
A powergamer is a player who is into powergaming. There are several different ways to powergame. A minmaxer is someone who tries to squeeze as much efficiency as possible out of a system. A rules lawyer cites rules and precedents that support their arguments against other players. A twink is a pejorative term for someone who abuses the rules in letter or in spirit, whereas to tweak is simply to make legal, reasonable alterations to improve a character's effectiveness. A cheat breaks the rules. A munchkin is an immature player, among whose many defects may be an excessive interest in powergaming, likely through crude strategies.
Is powergaming bad? If you're trying to make Superman on a limited point budget, powergaming is good, and it will probably take every ounce of minmaxing you have to do it. On the other hand, if your investigator can mow down shuggoths with his Uzi, that probably represents a difference in play style from the usual Call of Cthulhu campaign. As in many things, powergaming should be practiced in moderation.