What is the difference between refurbished and the original?

I want to buy an iPhone for my birthday, and the refurbished one is Way cheaper than the new one. Doesn't the refurbished one have some bugs or something wrong with it? Which one would be better to get?

Original-new
Refurbished - returned from a buyer

Refurbished can also be working units that were once damaged.

Original one is new piece
refurbished pieces are those pieces which was damaged and was in warranty period. These pieces are resend for the assembly and its damaged part was replaced by new parts. So its very less chances for damage in these pieces as their every part is recheked.
You can go for the original piece. But if you want to save some money then you can buy the refurbished piece. Both will works fine.

This is getting really confusing these days in Pakistan.
People are getting cheated by refurbished set and they are paying the original amount as for the new set.