Here's an interesting article by Adam Lovinus on the purchase of refurbished equipment. I sell brand new, refurbished, and used equipment. If purchasing from me, I differentiate between refurbished and used in the following manner:
Refurbished- Has been re-conditioned and thoroughly tested for proper performance by either my company or a reliable vendor that I deal with. Refurbished equipment always comes with a warranty of some sort that may vary in length between 1 month and 1 year.
Used- Anything I sell as used is typically not tested and may or may not be fully functional. Some used items may work just fine and I just don't have the means or time to test it, others may be good for parts only and still some may be just scrap. However, unless specified as "for parts only", any used item I sell online carry a full money back guarantee as to functionality.
Personally, I've purchased many refurbished items over the years and have not been disappointed. In fact, the digital camera I own was refurbished and I've been using it for 5 years now with no problems whatsoever.