canonicalization is a process for converting data that has more than one possible representation into a "standard", "normal", or canonical form. The process of establishing a single URL as the location of a web document. Ensuring that although you may be able to arrive to a page via multiple paths or addresses, there is only one final address which will be resolved by the server.
I think it means the varition of url like www.mydomain.com, mydomain.com or http://mydomain.com etc. if you search in google with inurl: operator all of them would give you different results.
I understand it to be if your site can have the same article in two places. For instance if you plublish in /news and then your cms publishes a duplicate entry in /headelines/around-the-world/ Google would see this as duplicate content, so you put the canonical tag on the dup page to let Google know that is not the orig. The NY Times uses this tag tons.