An animal is prey if it is hunted by another animal for food. It may be a prey animal, something which is regularly hunted by other animals, or it may only be prey while it is actively being hunted.
One example of a prey animal is a rabbit, which does not hunt other animals but is regularly hunted for food.
One example of a non-prey animal being prey in a situational sense is a tiger being hunted by another large, hungry, desperate predator. Tigers are not prey animals, because they hunt other animals and are rarely hunted themselves. However, they can be prey if something is stupid or desperate enough to stalk them.
Prey is either used as an adjective (the rabbit was prey, nothing more), a noun (the rabbit was prey for the tiger), or a transitive verb (the tiger was preying on the rabbit; that is, causing the rabbit to be prey).