Plain English Meaning
How much power the engine can actually deliver right now, based on the air it has to work with. Thinner air means weaker engine output.
Full Definition
The power output an aircraft engine is able to produce under given atmospheric conditions, primarily affected by air density. As air becomes less dense — due to higher altitude, higher temperature, or higher humidity — the engine takes in fewer air molecules per intake stroke, producing less power.
Context Anchor
You will see this term when checking takeoff distance, climb ability, and density altitude before a flight.