All the d20-compatible works are released under the Open Game License (OGL). (This includes more than d20 System works, which also abide by the d20 System Trademark License (d20STL).) A section in that license (Section 8) states that the publisher must clearly indicate which portions of the work he is distributing as Open Game Content (OGC).
Only material that is published as OGC can be used by others under the OGL, so any material NOT indicated as OGC cannot be used by anyone wishing to expand upon or use it in some public manner.
The most common practice is to publish rules-related text as OGC, maintain certain key phrases ("The Barenlands", "Mad Gnome Games", and so on) as Product Identity (making it is very clear these AREN'T OGC), and stay silent on other large portions of the work, making them not OGC by omission (such as the fluff story elements, or the text putting the rules in context in the setting).
Crippled OGC is when the text explaining what is OGC is so vague, and/or the OGC text is so interwind with non-OGC text, that extracting just the OGC portions from the work becomes impossible. The phrase's meaning also extends to cases where the designation is simply not inclusive enough, not releasing as OGC something that should be released under the OGL - but this is somewhat an extension of the term and will not be accepted by all.
For example, a publisher might say that "all game mechanics derived from OGC in this work are OGC". That's meaningless, you have to guess which parts of the text are OGC and which are not, and there is practically no way to reliably extract all the OGC text from it.
Crippled OGC is often very stringy, to the point where many believe it violates the OGL's obligation to release all material derived from OGC as OGC. The designation is also often vague and obscure, in contradiction to Section 8's requirement for a clear indication. It is also ungenorous and unkind. All this means it isn't very popular amongst those advocating or sympathetic to an Open Source-like movement. Or just decent folk.
Crippled OGC allows the publisher to release works without risk of it being republished or parts taken and used without his consent. Anyone wanting to publish stuff derived from his material must contact him and arrange it, just like in normal copyrighted work, as if the OGL didn't exist. This is of great financial benefit, and so you'll find many good publishers publishing crippled OGC.
I am not a lwayer. This is just my view of the subject.