Fabrication is the simple way of saying "old school prototyping." This can include hand fabrication, manual machining, wood working, sheet metal fabrication and almost always a good bit of ingenuity.
Working from a variety of mediums (i.e. napkin sketches, informal conversations, drawings, etc.), hand fabrication is the means to getting a prototype working or a model produced in a relatively inexpensive manner and/or when CAD data or drawings are not provided.