I've heard that Lisp lets you redefine the language itself, and I have tried to research it, but there is no clear explanation anywhere. Does anyone have a simple example?
Lisp users refer to Lisp as the programmable programming language. It is used for symbolic computing - computing with symbols.
Macros are only one way to exploit the symbolic computing paradigm. The broader vision is that Lisp provides easy ways to describe symbolic expressions: mathematical terms, logic expressions, iteration statements, rules, constraint descriptions and more. Macros (transformations of Lisp source forms) are just one application of symbolic computing.
There are certain aspects to that: If you ask about 'redefining' the language, then redefine strictly would mean redefine some existing language mechanism (syntax, semantics, pragmatics). But there is also extension, embedding, removing of language features.
In the Lisp tradition there have been many attempts to provide these features. A Lisp dialect and a certain implementation may offer only a subset of them.
A few ways to redefine/change/extend functionality as provided by major Common Lisp implementations:
s-expression syntax. The syntax of s-expressions is not fixed. The reader (the function READ) uses so-called read tables to specify functions that will be executed when a character is read. One can modify and create read tables. This allows you for example to change the syntax of lists, symbols or other data objects. One can also introduce new syntax for new or existing data types (like hash-tables). It is also possible to replace the s-expression syntax completely and use a different parsing mechanism. If the new parser returns Lisp forms, there is no change needed for the Interpreter or Compiler. A typical example is a read macro that can read infix expressions. Within such a read macro, infix expressions and precedence rules for operators are being used. Read macros are different from ordinary macros: read macros work on the character level of the Lisp data syntax.
replacing functions. The top-level functions are bound to symbols. The user can change the this binding. Most implementations have a mechanism to allow this even for many built-in functions. If you want to provide an alternative to the built-in function ROOM, you could replace its definition. Some implementations will raise an error and then offer the option to continue with the change. Sometimes it is needed to unlock a package. This means that functions in general can be replaced with new definitions. There are limitations to that. One is that the compiler may inline functions in code. To see an effect then one needs to recompile the code that uses the changed code.
advising functions. Often one wants to add some behavior to functions. This is called 'advising' in the Lisp world. Many Common Lisp implementations will provide such a facility.
custom packages. Packages group the symbols in name spaces. The COMMON-LISP package is the home of all symbols that are part of the ANSI Common Lisp standard. The programmer can create new packages and import existing symbols. So you could use in your programs an EXTENDED-COMMON-LISP package that provides more or different facilities. Just by adding (IN-PACKAGE "EXTENDED-COMMON-LISP") you can start to develop using your own extended version of Common Lisp. Depending on the used namespace, the Lisp dialect you use may look slighty or even radically different. In Genera on the Lisp Machine there are several Lisp dialects side by side this way: ZetaLisp, CLtL1, ANSI Common Lisp and Symbolics Common Lisp.
CLOS and dynamic objects. The Common Lisp Object System comes with change built-in. The Meta-Object Protocol extends these capabilities. CLOS itself can be extended/redefined in CLOS. You want different inheritance. Write a method. You want different ways to store instances. Write a method. Slots should have more information. Provide a class for that. CLOS itself is designed such that it is able to implement a whole 'region' of different object-oriented programming languages. Typical examples are adding things like prototypes, integration with foreign object systems (like Objective C), adding persistance, ...
Lisp forms. The interpretation of Lisp forms can be redefined with macros. A macro can parse the source code it encloses and change it. There are various ways to control the transformation process. Complex macros use a code walker, which understands the syntax of Lisp forms and can apply transformations. Macros can be trivial, but can also get very complex like the LOOP or ITERATE macros. Other typical examples are macros for embedded SQL and embedded HTML generation. Macros can also used to move computation to compile time. Since the compiler is itself a Lisp program, arbitrary computation can be done during compilation. For example a Lisp macro could compute an optimized version of a formula if certain parameters are known during compilation.
Symbols. Common Lisp provides symbol macros. Symbol macros allow to change the meaning of symbols in source code. A typical example is this: (with-slots (foo) bar (+ foo 17)) Here the symbol FOO in the source enclosed with WITH-SLOTS will be replaced with a call (slot-value bar 'foo).
optimizations, with so-called compiler macros one can provide more efficient versions of some functionality. The compiler will use those compiler macros. This is an effective way for the user to program optimizations.
Condition Handling - handle conditions that result from using the programming language in a certain way. Common Lisp provides an advanced way to handle errors. The condition system can also be used to redefine language features. For example one could handle undefined function errors with a self-written autoload mechanism. Instead of landing in the debugger when an undefined function is seen by Lisp, the error handler could try to autoload the function and retry the operation after loading the necessary code.
Special variables - inject variable bindings into existing code. Many Lisp dialects, like Common Lisp, provide special/dynamic variables. Their value is looked up at runtime on the stack. This allows enclosing code to add variable bindings that influence existing code without changing it. A typical example is a variable like *standard-output*. One can rebind the variable and all output using this variable during the dynamic scope of the new binding will go to a new direction. Richard Stallman argued that this was very important for him that it was made default in Emacs Lisp (even though Stallman knew about lexical binding in Scheme and Common Lisp).
Lisp has these and more facilities, because it has been used to implement a lot of different languages and programming paradigms. A typical example is an embedded implementation of a logic language, say, Prolog. Lisp allows to describe Prolog terms with s-expressions and with a special compiler, the Prolog terms can be compiled to Lisp code. Sometimes the usual Prolog syntax is needed, then a parser will parse the typical Prolog terms into Lisp forms, which then will be compiled. Other examples for embedded languages are rule-based languages, mathematical expressions, SQL terms, inline Lisp assembler, HTML, XML and many more.