An
Orbital Transfer Vehicle (OTV) is a
spacecraft designed to move freight, fuel or people between orbits, for example
low earth orbit and
medium or
high earth orbit, or even to and from
Mars, using fuel sent up from the earth. As a pure
spacecraft it never lands on a planetary surface.
Since the fuel would still be sent from the earth, it might seem to be a bit of a waste of time to have a special vehicle for this; however the engines of a launch vehicle need to be large enough to carry the entire weight of the vehicle and its fuel, and they become dead weight on orbit; which costs fuel to move around.
Once in space however, very much smaller and lighter engines can be used, you can gradually change the orbit, rather than having to fight gravity directly. An OTV only needs an engine the size of a wine bottle plus a small tank so an orbital transfer vehicle is much lighter and more efficient of fuel than using the launch vehicle. Also, it is easy to make it reusable as the engine is much less stressed, which again cuts costs.
Additionally, Orbital Transfer Vehicles can utilise ion drives or plasma drives, which use 3-10x less fuel than even the best chemical rocket but are thousands of times slower; indeed any vehicle can use both types of propulsion systems, the chemical rockets when you are in a hurry, and the ion drives the rest of the time.
Using a Orbital Transfer Vehicle actually significantly increases the payload that can be carried by a launch vehicle, the launch vehicle can launch to an unusually low, somewhat unstable orbit, and can arrange to rendezvous there. This uses less fuel and hence allows for more payload to be delivered to the final destination.