It is important to use consistent language when talking about changes made to a TFS environment. The term configuration and customization are sometimes used interchangeably. It is clearer to use the following to differentiate them:
Configuration applies to any changes made to application settings that help to make your TFS installation work correctly for a particular environment
Configuration would apply to objects like: TFS Administration Console (SharePoint, Microsoft Test Manager (MTM), Visual Studio, Web Access, Lab Management integration), User Security, Check-in options.
Customization is when TFS is changed to fit into a customized process.
Customization would apply to: Changing Work Item Templates, Custom Reports, Workflow and using the API to connect to other systems.
Extending is a term used with CRM that includes developing Plug-in's. With TFS this is covered under Customization.
See the CRM
rule for correct definitions.