Official definition from the American Heritage Dictionary of the English Language:
A person who dresses and acts in a style or manner traditionally associated with the opposite sex.
Mary is a transvestite, because she dresses like a guy.
Many tranvestites have a love of a particular type of clothing of the opposite sex, usually brought on by happy childhood memories of it.
*Not to be confused with the transsexual.
John: Why is Adam wearing a dress and a wig? Does he want to be a woman?
Carla: No, he's just a transvestite. He likes to cross dress.