Plain English Meaning
A small amount of error that every altimeter has, even when it's working correctly. It comes from the way the instrument is built and from the fact that real-world air is almost never exactly the same as the textbook conditions the altimeter assumes.
Full Definition
A built-in inaccuracy of the pressure altimeter caused by the limitations of its mechanical design and the assumptions of the standard atmosphere model it is calibrated against. Even a perfectly functioning altimeter will display some error because the real atmosphere rarely matches standard conditions of pressure and temperature, and because the instrument's internal components (aneroid wafers, gears, and linkages) cannot respond with perfect precision.