If you right click on a prediction message you'll see Apps > Prediction Refund. After clicking this option you will get a confirmation button. Once that is clicked all wagers will be refunded, the prediction will be deleted from the database - and the message will be updated to have a status of refunded
The "/prediction auto-refund" command will check for any prediction who's message has been deleted but hasn't been paid out. All of these predictions will then be refunded automatically.