Old Hippie gives the definition accurately.
How an inactive one is treated depends on:
A) How they conduct themselves
B) How the elders in their congregation (the one in which they became inactive) react.
C) How your believing family reacts to A and B
If an inactive person gets to about 2 or 3 years of not reporting (this was brought out in a few elders schools/CO visits and "written in the margin" of our elders books) then they are "off the radar" as far as being chased down for judicial action unless they become a "danger to the flock" which depending on the body of elders works broadly like this:
If you do something which is of a judicial nature and it becomes known about and unsettling to any jw and they bring it to the elders, the elders will discuss what to do - at this point anything can happen from you getting a free pass, through private advice to those in the know to curtail association with you to a judicial committee and DF'ing in absentia.
The more of these things mean you openly do then the more likely you will get DF'd/shunned.
Apostasy/Co-habiting/Xmas/Halloween decorations/smoking etc.
As time goes by then less of an issue will be made, especially if you are discreet and out of the territory. Having an elder relative can work for or against depending on how he views things (hard core or not.)
In my congregation area a long time inactive (20 years) now lives with her boyfriend and another has Xmas decorations up. (Mind you she could blame this on her worldly husband)
No action taken.
But another who was out for three years and who posted her halloween party online was "invited" (Ha!) to a judicial committee and DF'd in absentia.
And the more talks we get about it then the more hard core ones will obey the implication and the soft core will ignore.
Not an easy path to tread without much deep forethought.