Sig-fig stands for signature-figure. A sig-fig is a LEGO minifigure designed to either look like an AFOL, represent an AFOL in some way, be representative of an AFOL in a game or story, or be a representation of a character designed for a game or story. A sig-fig is sometimes referred to as a mini-fig avatar or as the alter ego of the builder.
Sig-figs can be assembled from official elements (the purist approach) or can incorporate some customized parts. Given that there are a limited (although ever expanding) number of possible elements to use in a figure, it is not uncommon to use customized parts, or customized stickers, and the prevalence of this is proportionally higher among sig figs (per element) than it is generally.