What is the meaning of optimization in seo?

Optimization refers to the process of improving something to its best possible level.

SEO - refers to the process of optimizing a website for search engine's. In this case it refers to making the website as 'search engine friendly' as possible.

This ensurer's that the website is made 'best possible' for the 'search engine' which will in turn result in better listing(pagerank) for the website on the search engine's