What do Karl Marx and Friedrich Engels mean by the term "class struggle"? 

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In The Communist Manifesto, Marx and Engels traced a history of class conflict stretching back through human history. By "class" they meant what is often called "relationship to the means of production." Some historical examples of class conflict were, in the words of the Manifesto: "freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman." Each of these groups were antagonistic, that is, they always had opposing interests.

The Industrial Revolution, according to Marx, had led to the consolidation of two classes called the bourgeoisie and the proletariat. The bourgeoisie described, in simplest terms, the owners of the means of production (the factories) and those who financed them, and the proletariat was the name Marx and Engels used to describe working class people who worked in the factories and did not receive the full value of their own labor. Over time, Marx thought that the exploitation of the proletariat by the bourgeoisie would be so great as to bring about the destruction of the former in the form of a class revolution.