Grey hat SEO refers to any SEO practice that is not quite manipulative enough to confidently be determined black hat but not quite holistic enough to be deemed white hat.
As an SEO it's almost impossible not to indulge in a little grey hat SEO. For example, any link building campaign in which you actively seek links could be deemed as grey hat as these links are not necessarily naturally occurring.
Google is notoriously vague when it issues guidelines about how to optimise for search. Implementing an SEO strategy can sometimes feel like solving a riddle.
From your own experimentation and taking advice published by experienced SEOs you can find a way to a good strategy, but when your following such wooly official advice from Google the line between a legitimate strategy and a dodgy strategy is inevitably blurred. It's within this blurred line that grey hat SEO occurs – you can be confident that you won't get penalised with grey hat techniques, but a lack of official guidance means you just can't be sure.