Typically it refers to staying in that (non-clinched) range where you can punch with both hands without having to move your feet to do so. If your opponent retreats then you would have to step forward to stay in the pocket. Fighting in the pocket offers lots of offensive options and puts psychological pressure on the opponent, but requires that your striking defense be very good, because (obviously) your opponent is also in range to hit you.
"Fighting In the pocket" is used as an alternative to the common practice of moving in and out of range.
I'm curious about what guy b objects to in the assertion that VT tends to fight in the pocket. The overwhelming majority of WC/WT/VT practitioners that I've seen specialize in that range. There are long bridge techniques in the system, but they generally seem to be tools for getting the practitioner into that close range. I've never seen a WC/WT/VT practitioner advocate hopping in and out of range and sniping from a distance.