A good proportion of a working day in the average office, is indeed working outside of the office. It seems nowadays though, the opportunity has arisen to let those who can't get a job - students for example - to utilise their skills for the online market. Working from home is something else altogether, but the definition is wide, sparce and frankly, a tad confusing.
You may have heard of the Mechanical Turk, the online marketplace for work, provided by Amazon. If not, it's essentially an online job centre, where you can search for tasks that need human intelligence to complete. These tasks, HITs (human intelligence tasks), can range from proof reading material to finding missing adventurers (unsuccessfully), but there are people out there who pay money for tasks which computers can't seem to ordinarily do. You start off slowly by working up the pennies, working your way up the ladder, but over time this could be quite a little earner. Not only is it a good way to make money, but you may even be able to avoid certain taxes.
Microsoft Research Asia have brought out a technology preview of what's known as Task Market, a similar yet seemingly better paid task offering. Sign in with your Windows Live ID, pick a task, complete it, and get paid through PayPal. Whether you happen to have a knowledge about art history, language and translation, electronics or computing, design and imagery, they'll be something on offer you can complete. Consider the Task Market, as a job cenre combined with eBay - you sell yourself (skills, not your body), and get paid for doing it (if you needed the first clarification, add this: "and not feel dirty afterwards.").
The system isn't foolproof though. Once the poster has accepted your work, that's when they will pay you. My suggestion is they "upload" the payment to a purgatory-style state which is non-returnable to the poster. Once the work has been accepted, the poster can release it into the worker's PayPal account. There's still a chance the worker doesn't get paid if the poster decides not to release the money, but it's a better solution because if they don't because the poster can't get the money back either. There is a full FAQ on the site, if you have any questions that want answering, but I do believe this is nothing short of something fantastic.
I will say at this point, if you can actually get it to work, you're in luck. I tried it on a variety browsers: Firefox 2 failed, Firefox 3 failed, Internet Explorer 7 failed, however Internet Explorer 8 emulating IE7 does seem to work. If you can't see it, try downloading IE8 or just see a screenshot of Task Market that I've uploaded. If MSR-Asia can get this fixed, I can't see this site not taking off.
That is the meaning of working from home - being able to feel productive whilst sitting in your pyjamas.