A non-soldermask defined (NSMD) pad has a solder mask opening larger than the copper pad size, leaving a tiny gap exposed between the edges of the copper pad and the edge of the solder resist. A soldermask defined (SMD) pad has a mask opening smaller than the copper pad, which means solder resist opening edge is always on top of the copper pad.
Both NSMD and SMD have their own advantages and disadvantages (see comments by raypcb cadence and macrofab). The general consensus seems to be that NSMD is preferred unless in some special cases, typically with BGA, where pad size is tiny and the part vendor's datasheet explicitly requires SMD.
This document will assume NSMD and recommend deviation only upon explicit request by part vendor datasheet.
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