When a borrow stops making the agreed payments to the lender, they are said to default on their loan. Usually this triggers the lender to retrieve the assets that were used as collateral for the loan. In the case of an automobile, this means repossessing the automobile. In the case of a house or other real-estate, it usually involves foreclosing on the property in order to regain possession of it so it can be sold to pay off the debt.
A strategic default is the act of defaulting when income would still allow the borrower to make payments. Usually this occurs when the value of the asset has fallen significantly.