"Text discovered in a nonpoetic setting, removed from its context, and presented as a poem." That's from the poetry dictionary (2nd edition) by John Drury. Here's an example:
in a nonpoetic
from its context
as a poem.
In the back of my trusty children's book (which I heartily recommend for anyone who wants to write using forms), A Kick in the Head: An Everyday Guide to Poetic Forms by Paul B. Janeczko (go out and buy it already!!), the first lines of explanation echo my thoughts exactly:
"Some people will tell you that a found poem is not really a poem." Janeczko goes on to say that it's worth exploring nonetheless. It's taking someone else's words which were NEVER intended as poetry, and then arranging the words and phrases on the page in such a way as to make it seem like an actual poem.
If you choose to undertake the creation of a found poem as an exercise, I suggest that you find someone who writes beautiful and/or interesting sentences, as opposed to using something from the U.S. Office of Management and Budget report, although that would certainly prove a more, uh, challenging task.
A Kick in the Head includes a quasi-found poem by Georgia Heard called "The Paper Trail," in which she describes seeing slips of paper wafting to the ground on September 11, 2001, and includes descriptions and quotes from some of the pieces and scraps. This poem is not technically a found poem at all, but is an example of using pieces that were quite literally found on the street as a jumping off point to create another poem entirely.
For a more truly "found" poem, check out the one on The Poetry Page under "Found Poetry", where an article from the Toronto Sun about Kurt Browning's fall during the Olympics became a poem.