What does the number of liters a car engine mean?

Liters pertain to displacement.

It is the swept volume of the cylinders in the engine.

This gives an indication of the size of the engine and the potential to do work.

In the USA, 'Cubic inches' are used instead, to measure the same thing.

It is not directly related to horse power. Other factors such as engine management and turbo chargers have a larger role to play.