It's the distance between your eye and the rear lens of the scope. A proper eye relief allows the shooter a full view through the device without impediment, (like the "cresent moon" shadow from the scope housing). Rifle scope generally have between 2 and 5" of eye relief.
Spotting scopes...I'm usually right on top of mine, regardless of the distance to target. Rubber eye pieces come in handy for that.
S.