I don't think there is any definition of Preferred Lies. It has to be defined by the local rules. At our club they post - Preferred lies in your own fairway. At other times they post "Winter Rules" (Which we know means that we can move the ball anywhere!).

Some clubs say Lift Clean & Place. This is what one web site (http://www.pgaprofessional.com/glossary/l.html)says about this:
lift, clean and place (sometimes also "preferred lies, winter rules") a mode of play, usually because of muddy or poor course conditions, where through the green the ball may be picked up, cleaned off and replaced (within a pre-specified distance from the ball's original location) in the position of the player's choice, if desired
Example: Conditions have to be pretty bad for the PGA Tour to go to lift, clean and place.

Note that they say "Through the green" - This means not just on the fairway, but anywhere in rough too.


Here is another link that discusses the subject:

http://golf.about.com/cs/rulesofgolf/a/winterrules.htm