It means when the runtime considers the application being visible in the headset and able to receive input. What this means in practice can vary between runtimes, the OpenXR spec leaves a lot of it up for the runtime to decide. You can see what the spec has to say about it here:
https://www.khronos.org/registry/OpenXR/specs/1.0/html/xrspec.html#session-states
In most cases it should switch to focused when the user is wearing the headset, the application is rendering and there are no system menus or other apps blocking input to it.