This is the terminology used to refer to a specific CVS branch of pfSense source code.
HEAD, or -HEAD refers to the development version of pfSense, where all new features are first added. When a release nears, HEAD is branched to a RELENG (Release Engineering) branch. This follows the FreeBSD project's development model.
RELENG_1 is the branch of the 1.x pfSense releases. RELENG_1 itself has never been a release. At the time of the 1.0 release we did not branch releases, so there is no RELENG_1_0 for 1.0 as there should have been. Going forward, every release has a branch.
Currently RELENG_1 is the development tree for pfSense 1.3. When the 1.3 beta process nears, a RELENG_1_3 will be created from what is in RELENG_1 at that time.
RELENG_1_2 is the branch for pfSense 1.2. This branch is currently frozen as release nears, which means no changes other than bug fixes are permitted.