My payment status says refunded - what does this mean?

When a payment is in the Refunded status, it means a payment record has been created for a refund to the customer.
Here is the list of status in Payments module:

• Pending: The payment transaction is pending.
• In Progress: The payment is in progress.
• Failure: The payment was not successful.
• Received (Invoice): The payment was received through an invoice.
• Paid: The payment that was made to vendors or suppliers. It is shown only if the payment is related to a purchase order or a bill. 
• Refunded: A payment record has been created for a refund to the customer. This field is shown if payment is linked to Credit Notes.

To know more about Payments, click here.