Hmm, I'll try and remember some of my college stuff for this...
Basically it means analysing a component or assembly, and deciding how you can simplify it. So, for instance, you see two parts held together with a fastener, and you'd try to think how you could use a single component in it's place, reducing 3 components to 1.
It's also a way of making life easier for prod eng's, by thinking about the manufacture of the part at the design stage. So instead of spending weeks on a design only for the prod eng to take one look at it and tell you you can't have that cos we won't be able to get it out of the mould, (or whatever handy excuse), you involve the production people from the start so you can think about not only what the component has to do, but how easily you can manufacture it.
It's one of those study-of-the-bloody-obvious type things, but the aim is to simplfy things, which in theory cuts leads times and production costs. A search for Concurrent Engineering should get you a load of hits on this.