The definition of this somewhat foreign word is pretty simple: it is a gemstone (real or otherwise) that is polished and round instead of faceted.
Cabochons generally have a flattened bottom and a rounded top. For faux gems, this allows it to be easily pasted into the setting. Transparent gems tend to be faceted so the light can pass through it. Opaque gems are usually cut en cabochon. Soft gems are usually cut this way too, as scratches will be less evident across the surface.
This is a great little word to keep in your arsenal, especially when you’re buying and selling costume or fine jewelry!