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It means the weight of 500 sheets of the basis paper used to make the finished product. For instance, standard 8-1/2" X 11" paper is actually cut from a 17" X 22" basis, which produces 4 sheets when cut. So, 500 sheets of 17" X 22" paper that weighs 20 pounds would be 20 lb paper. Once it is cut and packaged for sale, 500 sheets no longer weighs 20 pounds, so the number becomes a guide for you to judge the relative thickness of different papers.

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Q: What is meant by the term 20 lb paper?
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