Definition of Discount 

Factor

Definition: In a multi-period model, agents may have different utility functions for
consumption (or other experiences) in different time periods. Usually in such models they
value future experiences, but to a lesser degree than present ones. For simplicity the factor
by which they discount next period's utility may be a constant between zero and one, and if
so it is called a discount factor. One might interpret the discount factor not as a reduction in
the appreciation of future events but as a subjective probability that the agent will die
before the next period, and so discounts the future experiences not because they aren't
valued, but because they may not occur.

A present-oriented agents discounts the future heavily and so has a LOW discount factor.
Contrast discount rate and future-oriented.

In a discrete time model where agents discount the future by a factor of b, one usually lets
b=1/(1+r) where r is the discount rate