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It depends on who is doing the identifying. When a woman identifies as a woman, or a man identifies as a man, they are making a statement about their sex, on whether they are female or male.

When a man identifies as a woman, he is expressing his desire to be a woman, based on his ideal of what a woman is. Similarly, when a woman identifies as a man, she is expressing her desire to be a man, based on her ideal of what a man is. Neither have any direct experience of actually being the opposite sex, of course, so this ideal is based around gendered stereotypes and superficial cosmetic traits, particularly those related to sexual attraction.