It’s a measurement on easily you can convert an asset to usable cash. I remember reading topic like this on reddit long time ago when I first involved on DeFi investment.

In crypto, Simply it means the usable token(Bitcoin, Eth, Stablecoin and other asset with high valuation) that backed a certain token for easily conversions to usable token. Without liquidity, Token has no value which you can’t use to purchase something that has value.