it's an angular measurement. applied here it means the angular resolution of an optical system.

a degree of arc is divided into minutes of arc (MoA)(1/60 degree each), and there are 60 arcseconds in a minute of arc.

Two points that are 1 milliarcsecond apart, projected on a flat surface 200km away, are about 1mm apart on that surface.

edit: (can plug "tan(0.001 arcseconds) * 200km in mm" into google to check this out for yourself)