What I'm asking refers to this part of the update:

• Legendary Skills - Skills of 100 can be made Legendary. This will reset the skill to 15, return its Perks and allow the skill to affect leveling again. This effectively removes the overall level cap.

Specifically the emboldened part.

What does this mean? Does it mean the perks are "reset" as in they are no longer allocated to that skill and simply vanish, or does it mean they are "refunded" to you? For example, say you have six perks invested in sneak and then prestige it. Do you get those six perk points back, or are they lost?

It means they are refunded. You get them back to either be (re)spent in the associated tree or spent somewhere else.