EDIT: No, it seems that it's literally grouping players together in multiplayer games (but doing so in a way where latency between players is minimized.)
The example here is really simplified to focus mostly on the finding datacenters with low latency problem, but it could also include things like matching players of similar skill together, finding a set of players that would make balanced teams, making sure that players who are partied up together play in the same match and so on.
Basically, just like matchmaking in real life. It's the thing that works out groups of players who should play together in a match.