It basically means that the website will adjust to the users browser, for example this forum is a fixed width, a fluid or liquid format would make the forum extend to the full size of the users browser, taking advantage of the space available.
dont design stuff to 1000px, 600px, 400px etc. But design it with stretchability in mind. Use %ages instead of pixels for widths, and if you can use stretchable background images / repeating textures for banners etc..
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