Word guessing refers to a method of reading

Reading (process)

Reading is a complex cognitive process of decoding symbols for the intention of constructing or deriving meaning . It is a means of language acquisition, of communication, and of sharing information and ideas...

 where a beginner reader doesn't know what a word is in a sentence

Sentence (linguistics)

In the field of linguistics, a sentence is an expression in natural language, and often defined to indicate a grammatical unit consisting of one or more words that generally bear minimal syntactic relation to the words that precede or follow it...

, so he/she guesses what the word is and reads the rest of the sentence to confirm their guess, e.g. The fox jumped over the dog. If you didn't know the word "jumped" then you might read it as: "joo-mp-ed" then you would read the rest of the sentence and realise that it was actually "jumped".