Well, in generalized term its for categorizing your offerings based on your Business Criticality .. that might not be limited to just the Datacenter or Telecommunications but can be anything.. a Service, a Product, a Hardware like Storage, Server etc or your even customer Support.
For eg.. if you are supporting / hosting a business critical service/ application that needs to be available 24x7 then that would be classified as Tier1 service/application. If another application can sustain a small downtime but is an important one that can be classified as Tier 2 service or offering whilst if you have an Development/Test env for which Downtime doesn't matter then it would be a Tier 3 - 4... so and so forth
Another example say for example .. for Tier 1 VM.. a service provider would be offering best in class enterprise hardware like FC SAN, and Highend Memory and power full CPU..
for its Tier 3 - 4 VM offering it might be a NAS storage, with bit low Ram and CPU offering.
or If you are referring Tier1 , Tier 2 to Datacenter Tiers then here the Tier refers to Redundancy and Availability .. Higher the Tier more the Redundancy and Availability. Like for Tier 1 Datacenter the expected availability of Infrastructure and Service is of 99.671%, whilst for Tier 4 Datacenter the expected availability of Infrastructure and Service is of 99.995%