Redlining (also sometimes referred as Redlining Documents) - In the earlier days, when the engineers used to work on paper based drawings, normally - at a time of review - they will put their comments by using colored pencils or pens on the paper plots of drawings. The said process of putting the comments on the plots used to be referred as Redlining as usually the red-color pencils or pens were used.
With the advent of the electronic files - the complete process can be done on computers using the various annotations abilities as are offered by the various programs that are used for review. Some of the most common method of redlining include - using the native application capabilities - as annotations in Adobe Acrobat Reader etc. Today the adobe reader provides the complete set of redlining / annotation capabilities in their FREE Version of Adobe Reader Software starting with release 11.
There are also visualization applications that are available that show the image of the file on the screen and can enable the reader to put comments/annotations - without modifying the original file.
tBits CollabWrite has features that promote the usage of native applications as Adobe Acrobat for redlining (Reason - its FREE and almost universally available on machine - though certainly they have their own drawbacks. For the complete discussions - please see annotations) and also come along with optional integration with visualizations applications as Autovue (for which you need licence - please see Oracle Autovue) for giving the redlining functionality to the users. The users can choose as per their preferences the appropriate method of redlining documents. All other document authoring application - say MS Word - also comes along with their own redlining or commenting abilities (say in MS Word - Track Changes Mode) and are also widely used in the industry.