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When a car is totalled by an insurance company, the original certificate of title (issued by the state in which the vehicle is registered) is surrendered to the state.

If a person opts to buy that vehicle from the insurance company, which is often done for parts, the insurance company can issue (they're state bonded) a "certificate of salvage" for said vehicle. This is basically a note transferring ownership of an unfit vehicle.

This is necessary when a vehicle is bought for parts, since in most states, to use major components from another vehicle, you must add those component's serial numbers to your own title, by filing official paperwork with your local DMV.

The certificate of salvage, upon completion of a state inspection (not the one you pay for every year, this one's a little more in depth), will be exchanged for a new certificate of title in the state in which it was applied for. This new title will be branded with an "R" in the "special circumstances" section, which means that it's been "Officially reconstructed" and "passed state safety inspection".