This is where a threshold level has been passed.
In digital recording, any signal above the 0db threshold will cause clipping. It can be a severe and potentially damaging form of distortion that happens when a signal is too high for the piece of equipment it is being fed into.
This can be particularly damaging to loudspeakers. Manufacturers include many safeguards to avoid clipping in their equipment. It is very important to monitor meters and input lights. Flashing red is never a good sign.