When the word "crafting" is used in games, what does it generally mean?
Generally this refers to taking various items and/or resources and combining them to make gear, furniture or any other goods used throughout the game or gaming community.
Sometimes higher quality stuff may be crafted either by luck or by the quality of what was put into crafting something in the first place.
The context can vary depending on the game for example:
Minecraft is about crafting various resources and building things https://minecraft.wiki/w/Crafting
Also, the great Diablo 3 has released a video on their take on crafting:
Ultimately, games attempt to get you into crafting to either advance in the game, create a form of sometimes highly profitable revenue in massive multiplayer online games or to enhance the strength or survivability of your character.