An "October surprise" refers to action taken by a sitting President of the United States, using the power and/or influence of the Federal government to bring about a popular action shortly before election day (which takes place the first week of November), to increase his chances of getting re-elected.
The term was created by the 1980 Reagan Presidential campaign in their scenario planning-- they needed to prepare for the possibility that the incumbent administration of President Jimmy Carter might achieve the release of American hostages from Iran before election day. Thus, the canonical usage, referring to the alleged conspiracy between the Reagan campaign and the mullahs of Iran to delay the release of hostages until the new administration came to power, refers to efforts to prevent an October surprise, not create one.