“Capability” Is a field in the device type handler which specifies device class features available in the device. It is limited to the specific values which are pre-defined.
If you aren’t yet familiar with custom code in the SmartThings platform, the following FAQ should help (this is a clickable link)
You can read about capabilities in the developer docs. But just as an example, “switch” is a capability which means the device can receive a network command to turn on or off. But it could in fact be a water valve or a light switch or a siren or even a presence sensor. If you can turn it on and off from the network, then it will have the capability “switch.“
So it obviously stems from the every day use of the word, but it has a much more restricted meaning.