419 Eater explains scambaiting as such: "Well, put simply, you enter into a dialogue with scammers, simply to waste their time and resources. Whilst you are doing this, you will be helping to keep the scammers away from real potential victims and screwing around with the minds of deserving thieves."
Here's a classic example of scambaiting (just one of many at 419 Eater, by the way): tricking Nigerian 419 scammer to rewrite Harry Potter's The Chamber of Secrets - all 293 pages of the book - by hand! Link
Previously on Neatorama: Scambaiting the Nigerian Scammers: The Butterfly Bait