"Kit-bashing" is a method of modeling by which you use parts from a kit or an existing model, and build a new, custom or unique model.
Parts can come from commercially-available kits, such as freight car kits, or structure kits. Modelers have also used parts from non-railroad-related kits, such as automobile or military kits found at local hobby or crafts stores, including parts from kits that are not S-scale. Creativity is the key factor in this type of modeling. You have to look at the parts within a kit, not for what they were intended to be used, but for what they might represent in or on an S-scale model.
Another aspect of kit-bashing is combining parts from existing models and merging them together into one model. In the "Heavy Electric" page of this "How-to" section of the web site, Dick Karnes describes how he created the locomotive shown in the photo below from a single American Models GG1. The 2-C-2 consists of a shortened GG1 carbody atop a GG1 chassis with one power-truck portion of the chassis removed.
Below are some examples of kit-bashed models. Some links are to articles and some are to just a collection of photos with a brief description.