It is best to understand the quote in the context of what Picasso meant. This article explains it well: http://www.businessofdesignonline.com/picasso-good-artists-c...

In programming terms:it's the difference between copy-pasting some code vs. extracting the core design pattern and using that.

An important part of a design is the tradeoffs/decisions that went into it, and how it adapts in the face of new circumstances. Copying the final result is a shadow of copying the thinking process.

The example that sticks out in my mind are the Sony NEX-series cameras. These are cameras with sensors far larger than most point and shoots, but also do not have the bulk of SLRs - high performance at a pocketable size. Sony's entry into this market came after the extremely innovative and disruptive launch of the Micro-Four Thirds format by Panasonic, Olympus, et al, which were the first products in the category.

But far from being a "me too" or a ripoff, Sony took the core concept and advanced it further. They put an even larger sensor into the machine without increasing the bulk, engineered a ground-breaking new viewfinder (generations ahead of anything Panasonic and Olympus had), and put focus into the camera's software that is unprecedented - focus peaking, touch-to-focus, etc.

Sony looked at a disruptive entry in the market, distilled it down to its core, and took it further than the incumbents. That is IMHO the difference between "copying" and "stealing".