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Typically applied to online regularly-changed/updated video games.

To "nerf" something means to reduce its 'power' or effectiveness within the game. Often times this is to solve some problem in the game (such as an 'overpowered' weapon/ability or super effective strategy), or to push the players in one direction or another (such as a new cosmetic/item/character).

Nerfs affect the 'meta' or prevailing strategy/characters/items used to win the game. In this way nerfs also give control to the developer of how the players play the game. i.e. nerfing a commonly used item to discourage the community from playing with it.

Some nerfs can be so drastic they change the very fundamentals of the game, and are often a contributing factor to the size of the playerbase, for good or bad.

Outside of games, this would again mean to reduce the things 'power' or 'effectiveness'. The exact analogy that gave birth to this term, is that of a Nerf Gun, compared to a real gun.
Oh man, they totally nerfed 'Titans Armor'! Guess I'll stop playing Golem now :/

They nerfed Irelia again?? Oh wait, its actually a buff. <-- (opposite of nerf)

Great, so now all the free-2-play guns are nerfed, guess I have to buy some to keep competitive. :(
Related Words
The term "nerfing" comes from the online gaming world of Ultima Online.

At one point in the game, the developers reduced the power of swords in melee combat.

This resulted in players complaining that it was like they were hitting each other with nerf bats, not swords.

From then on, if ever something gets made less worth while than it had been originally, it is considered 'nerfed'
"Oh man, they reduced the dmg on the berserker class and now it's totally nerfed!"

"Damn, the Devs nerfed those axe's real good!"
nerfed by Dave Elliott January 11, 2005

Nerielis 

She’s a really nice girl she is very loyal and she’s very beautiful you never see her being 2 faced she’s honest and has a bad temper you she’s funny and so kind you never should take her for granted she’s a simple minded person but she’s really sweet she also gives the best hugs everrrr that’s it...
Person 1: Nerielis is so cuteeee
Person 2: she curvy asf
Person 3: yo that’s my girlfriend...
Nerielis by BABYGIRLTHOT June 29, 2019

edith nereida 

The most beautiful girl in planet earth who I happen to love very much. She walks like a queen and looks like one too. Her soul and heart are full of endless happiness. She's a big dreamer. everybody wants to get to know her. She can be bitchy, but she still makes you feel happy and smile anytime anywhere! I love Edith nereida.
Wow that girl is beautiful!

Her name must be Edith Nereida!
edith nereida by Her lover 69 December 30, 2013
Nereida... She is great person. Hides her feelings and is strong. She is really smart, tall, and gets any guy. She loves playing hard to get but only wants one. She is a mystery, there is more to her story that she never tells. But she's a great best friend and not easy to forget.
I love your height Nereida.
You are to beauty many envy you for no reason.
Nereida by La_Gem November 26, 2017
A very rare kind of woman: Whip-smart, honest to a fault, fiercely loyal, and quite possibly the best lay you will ever have.

Neridas tend to be from a foreign country, are thin, have brown hair, and a penchant for impossible men. They sometimes pretend to like football if they happen to be dating a Brazilian footballer, but otherwise are not that in to sports.

Neridas make excellent friends and even better lovers.
My girlfriend sucks. I wish I was dating a Nerida.

That girl I met last night at the bar? I can't believe the crazy sex we had. She was a total Nerida.
Nerida by naked manatee February 6, 2010