Derating is the technique employed in power electrical and electronic devices wherein the devices are operated at less than their rated maximum power dissipation taking into consideration the case/body temperature, ambient temperature and the type of cooling mechanism used.
Power electronic devices have a maximum power dissipation rating usually quoted at a case temperature of 25°C. The datasheet for the device also includes a derating curve which indicates how much a device will dissipate without getting damaged at any given case temperature and this must be taken into account while designing a system. As can be seen from the derating curve image for a hypothetical BJT, the device (rated for 100 W at 25°C) cannot be expected to dissipate anything more than about 40 W if the ambient temperature is such that the temperature at which the device's case will stabilise (after heat-sinking) is 65°C. This final case temperature is a function of the thermal resistance between the device's case and the heat-sink; and the heat-sink and the ambient (this includes the heat-sink's temp/watt rating - with lower values implying better cooling characteristics).