Transmog, or Transmogrification, is a much-requested feature that will be arriving in Destiny 2: Beyond Light. In its most basic form, it separates how your character plays from how they look. Up until now, you have needed to wear a particular piece of armor to get the benefits of that armor, and that armor will look a certain way. This makes mixing and matching pieces across sets a pain, as your Guardian will look like they go dressed in the dark.
Transmog will allow you to have your character look a certain way, and beneath that is the gameplay layer, independently informing how your Guardian plays. The easiest way to think of it is as an extension of the Ornament system that currently exists in Destiny 2, where you apply an Ornament to a piece of armor to change the appearance.
The best news of all was recently revealed by Luke Smith on a recent Twitch stream. Transmog will work based on your Collections, not your Vault. This means you do not need to hoard items and armor to be able to take their look and place it on another piece of armor. You can simply earn something in the game by playing the activities, have it added to your Collection the way all weapons and armor already are, and you will be able to Transmog another armor piece to look like it.
This is great news, as it frees up a lot of Vault space for a lot of players, while also introducing a popular feature to the game. It should help to add much more variety to the Guardians that you see in the game, allowing people to sport interesting and unique looks without needing to sacrifice the gameplay benefits of powerful armors.