At long last, Valve has added a robust refund system to Steam. Users can now request their money back "for nearly any purchase on Steam—for any reason." The only conditions are that the request has to be made within 14 days of the initial purpose and with less than two hours sunk into the title. It's even OK to request a refund if you buy a game just before it goes on sale and want to repurchase the title at the lower price.
Refunds are available for software, game bundles, pre-release titles, and most DLC. The system supports in-game purchases, too, but the cut-off for those is only 48 hours. It's also up to developers to enable refunds for their in-game transactions.
Valve says Steam will notify customers whether items they're about to purchase are eligible for refunds. Approved refunds can be paid out via Steam Wallet or whatever method was used for the original purchase.
There are some additional strings attached, of course. Refunds are limited to purchases made directly through Steam; if you bought a key from a third-party vendor, you'll have to deal with them. Players banned for cheating in a game won't be eligible for a refund for that title, and Valve reserves the right to deny requests from people who appear to be abusing the program.