In the school setting, it usually refers to reaching a particular goal like a fourth grade reading level or a 90% or better on the state-mandated standardized test. It's a word educators adopted to use to describe benchmarks their students must strive to reach. Unfortunately, it's a lot like using the word peace-keepers to describe armies... sounds good, makes you feel good, but is completely off base.
"Mastery" refers to the act of perfecting a particular skill, subject, or other such ability. No matter how good we are, we'll never reach perfection on a regular basis. The pursuit of mastery is a journey, not a destination. This is the principle reason use of the term in our schools is off base. As much as our schools like to claim to help students along this journey to mastery, every single action suggests otherwise.
The journey toward mastery is just that- a journey. It is fueled by the intrinsic motivation to continue toward mastery with the realization that the final goal can never be reached. The journey itself is the reason we work.
In schools, we replace that intrinsic motivation with rewards. Worse, we also use punishments. We set externally-derive goals (think adequate yearly progress.) We systematically kill intrinsic motivation to embark on the journey. We're no longer working toward mastery... we're working toward a series of short-term goals that must be met or else.
Sadly, most elements of the education system, from the policy-makers to the members of the PTO, are complicit in this system. They're not intending to do harm... they just don't really understand human nature. We have a wealth of motivation research that's pretty clear: the methods we use in schools (or the very design of our schools) is the exact opposite of an ideal learning environment. The misuse of the word "mastery" is an unfortunate side effect of this fundamental problem.
Redesign schools from the ground up. Question every assumption we have. Have the courage to make radical changes.
We have the answers. We know what would work. We just need the courage to take the plunge.