Here's a pretty good description of what it means from Search Engine Watch. It meant a degradation of websites that were considered to be "spammy".
Google principal engineer Matt Cutts said in an interview with the Mercury News at the South By Southwest (SXSW) Interactive conference that the company is planning to make more changes to its searching algorithm. "We've not only launched this change, but we're looking forward through the rest of the year at other changes we can make to try to improve search quality. There is definitely still room for improvement in the space of low-quality content -- or in trying to reward higher-quality content," Matt Cutts said.
Here is another good article about this topic. Also stating that the panda project is all about degrading spamy sites from top positions and that legit sites, have nothing to worry. This comes from people who know something about SEO. Regards http://www.seo.com/blog/googles-mission-statement-key-longterm-seo-success/
The 'panda' update is also nicknamed 'farmer' update because it affected mostly content farms, i.e. websites that have published a lot of user generated content in a short time.
My main employer (I'm a freelancer) dropped two page ranks ever since the Google Algorithm changed. Ironically enough, my own website gained one page rank, lol.