In cel nav, this describes the bending of light rays as they enter the earth's atmosphere. The effect takes place because the light ray is traveling from the vacuum of space intro the atmosphere which slows down the light wave. An analogy of light bending going from air to water is shown in this article on Refraction in a sink.
The effect makes all sextant angles too large, although the correction is very small except for low sights. Sights near the horizon have a maximum refraction of about 35', but at heights of only 10° the refraction has dropped to 5'; at 5° it has only increased to 10'.
At a sextant height of 40° the correction is only 1'. All sights must be corrected for refraction which is included in the Nautical Almanac under the general name "altitude correction." Recall that very roughly a 1' sextant angle error translates into a 1 nmi error in a fix, so small corrections do matter.
For heights above 6°, the refraction correction is very nearly equal to 60' divided by the sextant height in degrees. See Altitude Corrections.
