Lazily, I've pinched this paragraph from an article by Paul White on screwcaps (I might re-publish it as a guest post) that neatly sums this up without too much science:
"Reduction is essentially the mirror image of ‘oxidation.’ Both alter the purest expression of fruit. And just as with brettanomyces, a tiny bit can add complexity, while too much will permanently destroy a wine’s aromas and flavours. Unfortunately both can easily tip over into unacceptably ruinous levels. So as oxidation increasingly redresses wine with an unfresh, caramel-like sherry character, reduction continually forces more negative sulphurous characters into wine reminiscent of struck flint, burned match, rubber, cabbage or rotten eggs. The reductive process revolves around a sulphur compound called hydrogen sulphide (H2S) which is formed in the absence of oxygen by yeast during fermentation. Unchecked by oxygen, H2S tends to hang around, tenaciously, stinking things up. This is not to be confused with ‘free’ sulphur dioxide (SO2) that winemakers use to sterilize and preserve wine, which dissipates more readily."
It's worth adding that the word reductive can be used as a deliberate winemaking technique, as in purposely excluding oxygen in the process. Whereas reduced tends be be a negative term describing the net result of excessive reduction in a wine, as discussed above.
