Basically the same thing as 'dumping' is in real life.
E.g. intentionally selling product bellow what it costs you to make it just to get rid of it, or to try to establish yourself in that market (in ffxi that's usually getting other crafters out).
Of couse, it's a bit difficult to quantify that way in FFXI, b/c there's a lot of NQ stuff that sells at a loss, b/c a crafter is after a HQ.
So...I'd say it's if you're screwing up the market, you're flooding.
For example, if you're leveling up a craft and attempt to sell 200 of something by lowering it's price for the next 3 months, you flooded that market.
Tordall - BC:100+3 LC:60+1 AL:60+1 WW:60 CO:60 CC:60 BS:60 GS:60 Fish:91
Sugared - CO:100+3 WW:15
Kinarii - AL: 87+2 BS:14 GS:1