Oxford English Dictionary
1. Rhetoric. That figure of speech which consists in the substitution of a word or expression of comparatively favourable implication or less unpleasant associations, instead of the harsher or more offensive one that would more precisely designate what is intended.
2. An instance of this figure; a less distasteful word or phrase used as a substitute for something harsher or more offensive.
skunk fur > "Alaskan Sable"
pornography > adult entertainment
overweight > big-boned
civilian casualties in warfare > collateral damage
to die > cash in your chips, cross over to the other side, pass away
penalty, punishment > disincentive
junk mail > direct mail
genocide > ethnic cleansing
coitus or sexual intercourse > go all the way, do the wild thing, making whoopee, roll in the hay
stolen merchandise > it fell off the back of a truck
garbage dump > landfill
trailer > mobile home
examples selected from http://www.euphemismlist.com/