It is the number of people that will produce the highest per capita economic return given the resources available, and their full utilization. Should the population rise or fall from the optimum the output per capita, and standard of living, will fall.
A country is said to be under populated if it has insufficient people to make full use of the resources available. On the other hand a country is overpopulated if there are too many people and few resources. There will be diminishing returns.