Integrating out in field theory jargon means the following:
Suppose we have a partition function given as a path integral (which I will discretize). This path integral is over two kinds of fields, let us call them \phi_{i} and \psi_{\alpha}, where the index i labels all the possible modes of the "phi"-field, and the index \alpha labels the possible modes of the "psi"-field. Usually, these labels are the space-time coordinates, or after Fourier transforming, the 4-momentum components. Furthermore, we suppose we had performed a Wick rotation so that time is imaginary. The obtained "Euclidean" action:
<br />
S_{E}\left[\lbrace \phi_{i} \rbrace, \lbrace \psi_{\alpha}\rbrace\right] = \sum_{i, \alpha}{L_{E}(\lbrace \phi_{i} \rbrace, \lbrace \psi_{\alpha}\rbrace)}<br />
involves a double summation over these indices and L_{E}(\lbrace \phi_{i} \rbrace, \lbrace \psi_{\alpha}\rbrace) is a corresponding Lagrangian density.
The partition function is then:
<br />
Z = \int{\prod_{i, \alpha}{d\phi_{i} \, d\psi_{\alpha} \, e^{-S_{E}\left[\lbrace \phi_{i} \rbrace, \lbrace \psi_{\alpha}\rbrace\right]}}}<br />
Now, "integrating out", as pointed out by others, simply means we perform the integral over the "psi"-fields only, i.e. we perform the following integral:
<br />
\int{\prod_{\alpha}{d\psi_{\alpha} \, e^{-S_{E}\left[\lbrace \phi_{i} \rbrace, \lbrace \psi_{\alpha}\rbrace\right]}}} \equiv e^{-S^{\mathrm{eff}}_{E}\left[\lbrace \phi_{i} \rbrace\right]}<br />
We had emphasized the fact that the integral still depends parametrically on the "phi"-fields. The reason for the peculiar exponential form is that the partition function can still be written as:
<br />
Z = \int{\prod_{i}{d\phi_{i} \, e^{-S^{\mathrm{eff}}_{E}\left[\lbrace \phi_{i} \rbrace\right]}}}<br />
In this regard, S^{\mathrm{eff}}_{E}\left[\lbrace \phi_{i} \rbrace\right] may be treated as an "effective action" for the "phi"-fields after the "psi"-fields have been integrated out.
This procedure is far from trivial. One has to choose which fields modes are unimportant and have to be integrated out. Usually, we integrate high momentum modes and leave low momentum modes, but there are differences. Then, the "psi"-integral is also far from trivial and most be done perturbatively.