There are several server options that affect weapon damage in Team Fortress 2, and they're often confused:
Weapon Spread -- With this turned on, hitscan weapons, such as shotguns, will have the same non-random pattern of "bullets" each time they are used. Default is ON.
Damage Spread -- Each weapon normally has a minimum and maximum damage. No Damage Spread means that each weapon will do a set, average, damage rather than varying between attacks. Default is ON. (Critical hits always do 3 times damage)
Damage Falloff -- Normally, the damage dealt by a weapon decreases the farther away you are for your target. If this is turned off, A rocket detonating right next to you and a rocket shot from the opposite side of the map will do equivalent damage. Crits are never affected by Damage Falloff. Default is ON.
The default is to have Damage Spread ON. Nodmgspread refers to servers which have turned it OFF.