A spriteswap of a character will contain the exact same moves, normally pulled off the exact same way, with the exact same effects as well. In a lot of spriteswaps, you can even see the sprites of the original M.U.G.E.N character in some of its animations.
Spriteswaps may not be looked upon too well by the M.U.G.E.N community in general, unless the character creator's high quality of character art offsets his or her inability to do original coding. Usually, this causes someone to step in and offer programming assistance for his next character.
HD sprite remakes of characters also count as spriteswaps if nothing else is changed, but unlike said above spriteswaps, they are generally more favoured as they improve an aspect of the character. (Especially so if the character is originally low-resolution)
Examples of a spriteswap
Kung Fu Man, being the first M.U.G.E.N character ever created and the sole character that comes with M.U.G.E.N (not counting Kung Fu Man 720), is generally one of the most common bases for spriteswaps.
It's debatable whether stages can also be spriteswaps. Some people just say that stages can only use other stages as a template. However, there are stages that could qualify as spriteswaps, because they use the exact same layout and number of sprites, such as Spear Pillar being a spriteswap of Emerald Hill Zone.