You take an existing game/IP and recreate it with lower fidelity, usually due to the platform of choice. It's common to take a 3D game and then work within the limitations of removing one dimension. Since PICO is severely limited, that's the novelty and challenge to rebuild an existing game inside it. Super fun.

A remake, in video games, is usually a rewrite on a more powerful platform. You get better resolution, better music and event better gameplay.

A demake is a rewrite on a less powerful platform.