MDM (Mobile Device Management) is a way for organizations to manage and secure their mobile devices, such as computers, smartphones, and tablets, used by employees or members.
MDM Supervision refers to a mode in which a macOS or iOS device is managed under MDM with a higher level of control and security. A device that is MDM supervised has been enrolled in an MDM solution using Apple Configurator, Apple Business Manager, or Apple School Manager, and is subject to stricter management policies and restrictions set by the organization or the MDM solution provider.
Supervision allows IT administrators to enforce additional security measures, such as locking down certain settings or features, restricting access to certain apps or content, and even remotely wiping the device if necessary.
In summary, MDM-supervised devices are devices that have been enrolled in an MDM solution with enhanced management capabilities and security measures enforced.
Please note Supervision (as a title) for computers was introduced in macOS 10.15, but that release only applied to computers enrolled via Automated Device Enrollment. In macOS 11+, all expanded, where any user-approved MDM enrollment was considered supervised.