Testnet refers to an alternative blockchain used by developers for testing. Testnet tokens are distinguished from actual bitcoins in that these are never supposed to have actual value.
This is beneficial to application developers or crypto testers as they can easily experiment without being compelled to use actual coins or break the main chain.
To date there are three generations of Testnet. Testnet 2 was the first Testnet reset with a different genesis block. This was done as people were starting to trade Testnet coins for actual, real world money. Testnet3 is the most recent test network. The coin was introduced with the 0.7 release and had introduced a new genesis block.