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A standard definition is: The gap between the skills needed for a position and the skills possessed by the employee or potential employee.

For an individual that means "I don't have the skills to perform the job that I want."

For a society, however, it means the aggregation of this individual problem.  Employers are finding that too few people have the skills that are needed to fill available positions.  As a result jobs go unfilled, wages go up, jobs are "off-shored" to other parts of the world where potential employees DO have the skills.  Or the jobs maybe prioritized for automation.

Here is an recent New York Times article is a good example of the common story we read daily about the US Skills Gap.