The term "greenwashing" was added to the Oxford English dictionary in 1999, where it is defined as "disinformation disseminated by an organization so as to present an environmentally responsible public image." The word, a combination of green and whitewashing, was coined by suburban New York environmentalist Jay Westerveld in 1986 in an essay about the hotel industry.
The term greenwashing is generally used when an organization spends more time and money on advertising that they are "green" or environmentally-friendly than on actually putting into place practices that are environmentally-friendly. Some organizations may do this simply as a matter of public relations.
Tools used in greenwashing could include press releases by a company which may tout various initiatives such as task forces, re-branding of products, energy or pollution reductions, etc. In reality, the company may actually be doing very little that is environmentally-friendly.
The term greenwashing can also include the practice of misleading customers about the environmental benefits of a specific product through misleading advertising and unsubstantiated claims. An example of this would be a company changing the name of their harsh detergent product from Product X to Product Green, yet the product is still the exact same harsh detergent.
For more on this, read The Green Marketing Machine.
This question was answered by Ken Clark.