The way I look at it is, if you take characters and put them in an environment different from their own - i.e. you put Harry and Draco into a non-magical school, that's an AU, but if you just make the characters something canon has not mentioned - i.e. you make Bill a Fae, but he's still the singer of Tokio Hotel and still became famous the same way etc, it's not an AU.
Also, I don't consider fics that use canon to a point and then go off their own way AUs, I classify them as alternative endings as it were :). Which brings up one contradiction in my own head, because if someone says a fic goes AU at point x I think alternative ending, not alternative setting ::g::. Well I didn't guarantee that my definitions would be consistent or make sense ::g::.
So for me if I see AU in the definitiion of a story I think I'm going to be reading something like Tom and Bill are assassins or Harry and Draco were brought up as brothers, and if someone says a fic goes AU while on the roof top in HBP I think it goes in an alternative direction with the same reality to the books, but if someone if just making Harry part Veela or Tom a haemaphrodite then I don't look at it as AU.
Did that make any sense at all? :P
So how do you all look at AU?