I'm not sure if there's an official definition, but it's taking pieces from photos and putting them onto the canvas, rather than painting them from nothing. Like >>2942 suggested, you usually paint over it somehow to adjust it and/or hide the fact that it's a photo.
The division comes mainly from purists and actual concept artists. A real concept artist will realize that it's not fine art, you're not supposed to put it onto the wall but rather make a disposable presentation of design. Your whole job as a concept artist is to make other people see the product in visual format so they can tell if it's good and what needs to be changed, and it doesn't matter for shit how and where and who brought that visual format to the table.
Meanwhile purists will consider art more as an artform, and using photos rather than using your own painting skills is "cheating". You didn't really draw it if you just cut it from a photo after all, so it diminishes it's status as a "painting".
There's also those who think that there's nothing wrong with it period as long as the result is good.
Personally my main problem with these kind of things is the fact that all kinds of shit is lumped into the same category. There's rarely any distinction whatsoever between a 100% pure digital painting, and a photobashed 3D render. I have the same problem with the word "art", nowadays any pile of shit on the pavement can be "art" if some hipster faggot decides to call it such.