I just use it as an all inclusive phrase to refer to various aspects of recording, post-production and sound engineering.
The recording equipment used, the microphone placements, instrument settings, added reverb, compression, equalization, etc. etc. etc.
If I fault an album for its "production", it means I think it sounds bad for reasons not having to do with songwriting or the performances of the involved musicians and singers.
If you check out some metal albums produced by Andy Sneap and compare them to albums produced by Rick Rubin, for example, it will be clear that there's more to the sound of an album than who plays what on it.
I don't really have any rules, though. What works for one album doesn't for another. I do like a nice, clean, dynamic album, but some albums work really well with something muddy and rough sounding, for example.
Perhaps I care more about this than most people in here. It's not uncommon that I refer to various aspects of the "production" of an album when praising it/complaining about it.
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