The Collaborative International Dictionary of English v.0.48:

Varsity \Var"si*ty\, n.
   1. Colloquial contraction of University. [Brit.]
      [Webster 1913 Suppl.]

   2. the team with the best players of a school or club, being
      the main representative of the organization in competitive
      play between schools or organizations. In schools,
      contrasted with junior varsity. Also used attributively,
      as, the varsity football team.
      [PJC]

WordNet (r) 3.0 (2006):

varsity
    n 1: a British abbreviation of `university'; usually refers to
         Oxford University or Cambridge University
    2: a team representing a college or university [syn: varsity,
       first team]