Futanari means "with two form" or something like that.
Traditionally it was used for entities who could change physically their physiology, going to female to male and viceversa as a switch. Gender bender pretty much.
In the hentai, then in live action porn, futanari where pretty much 100% females with a sausage in the place of the clit (or they had both) but no balls. It started like that the trend, in the 80thies/90thies. They were lesbians that accidentally, usually due supernatural forces (magic, deities etc), rarely as biological exception, developed the penis. A lot of times they developed the attraction to other females after the appearance of penis.
Still today in Japanese live action porn funatari are girls with artificial penis. This genre of porn was translate in english with "dickgirls".
Transsexuals are refered with different terms.
The confusion of the term happened in the last years, futanari is a niche genre with a lot of other fetishes added on and developed tons of other little subgenre (oversized body, horror futa with creepy transformation, futa on male, only masturbation etc. etc.). In the west meanwhile trans porn was pushed as futanari, therefore this created the confusion of the last years.
It ended up like the furry niche, nowadays many people think that furry means gay/trans too after the lgbt (well, lets remove the lesbians, the "gbt") communities took up the genre and almost monopolized it.