Oxygenated blood is filled with oxygen from the lungs. In contrast, deoxygenated blood has had most of its oxygen removed and is returning to the lungs, ready to become reoxygenated.
Oxygen is carried within red blood cells by a compound called hemoglobin, which is able to bind up to four oxygen molecules and form oxyhemoglobin. Each red blood cell contains large quantities of this molecule, allowing them to carry around far more oxygen than needed to ensure that supply always meets demand. Blood is never truly deoxygenated in the sense that all the oxygen is removed. When oxygenated blood reaches the tissue, hemoglobin lets go of oxygen molecules in a reversible reaction. The first couple of oxygen molecules are much easier to remove than the last two, providing a gradient of release. The color of blood changes from bright red, when oxygenated, to dark red, when the oxygen has been removed to be used by the body.