What is a replacement iPhone exactly and What does it mean?

Replacement iPhones who's part number (also referred to by Apple as model Number) starts with the letter N may be new or refurbished at Apple's discretion. There is no way to know either way.

With that said, refurbished iPhones go through an extensive validation process, get all new screens, batteries, back plates, and new internal components as required. They are no different than brand new iPhones, and in some cases better as they are verified and go through strict testing process to make sure all components work as new.

Ah, thanks for that screenshot showing “Model Number”. I see the source of confusion. It is actually the Apple Order Number as I said, but mis-labeled. If you tap on that row in Settings, you will see the actual model number which should be “A” followed by four digits.

farman19 wrote:

I checked it’s model number starts with “N”

No iPhone model number starts with “N”.

Identify your iPhone model - Apple Support

Apple order numbers may start with “N”.

Your writeup seems to indicate you already know this is not a brand new, factory sealed iPhone.

A replacement iPhone is an iPhone that was provided to replace a previous iPhone.

Of course, if you provided more context for your question we could likely provide more information.