A transcript or transcription is a literal copy of another document. The copy is as faithful to the original as possible. Spelling, grammar, and punctuation are included in their original form even if there are errors or usage that does not match present-day practice.
Transcripts may or may not reproduce the original letter spacing and line breaks.
In the digital age, transcripts are usually created on a computer: transcripts stored in digital form are easier to search, store in databases, re-print, etc.
Some transcription guidelines and templates for some common records can be found at Terry Cole's Genealogy Research & Tips under transcription.
A photocopy, microfilm image, or scanned digital image of a document is not a transcript. They are copies. They are closer to the original form of the document but automated searching is typically not available or is performed with the aid of a transcript or abstract.
A useful bit of software to make transcription easier can be found at http://www.jacobboerema.nl/en/Freeware.htm.