I see a "project player" as one that has raw skills in certain areas but lacks in others, or one that requires a lot of development but has a very high upside. Just to use examples from my own team, Alex Steen and Nik Antropov would be examples of two "project players".
Saint Nik needed a lot of work all around, but after a lot of years of frustration he's become a great player for us, and probably the best forward on our team not named Mats.
Alex Steen is a different type of example of a "project player". The Leafs drafted a kid with great vision, speed, creative instincts and world class hockey sense. His first year over in North America was pretty good, netting close to 20 goals and finishing with 45 points. But Alex did lack in a few areas of his game, most notably on the defensive side of the puck. So last year he was put on the wing (he's a natural centre) to focus on a shutdown role for the entire season. Coming into this season, he's now one of the best players on the team away from the puck, and along with Matt Stajan leads the Penalty Kill. Although his production was down from his first year, he's still a much better player that he orignally was. Now he's being eased back into a more offensive role, while still being told to keep his defensive game up. He's responded well with 2 goals, and assist, and a SO winning goal in the last 3 games. He's also silently becoming a leader both on the ice and in the dressing room. He's getting involved almost on a daily basis with the media, and sticking up for his teammates. It helps that management has placed him besides Mats in the dressing room since day 1.
It may sound like a slow and tedious process, but if things continue the way they have there is no doubt in my mind Alex Steen, like Antropov, will continue to become one of the best forwards on this team. If all goes well you should one day see a fast, creative forward with great vision, that can play in any situation (whether it be clutch scorer late, shutting down the opponents best players, leading the PK or PP, etc...), at any forward position, and a great leader.
Edit; Just to add to this, Christopher DiDomenico is another example of a "Project". 2nd in the QMJHL in scoring at 18 years old, the 6th round pick still needs to fill out and improve his skating. But if he does, you get a great player.