In hosted software (e.g., web site/application, database not shrinkwrap software) development, a development environment refers to a server tier designated to a specific stage in a release process.
Development, staging, and production is a common arrangement of tiers.
A more comprehensive list of tiers:
Environment/Tier Name Description
Local Developer's desktop/workstation
Virtual Machine VM hosted on developers desktop or possibly development server
Development Development server aka sandbox
Integration CI build target, or for developer testing of side effects
Test/QA For functional, performance testing, Quality Assurance etc.
UAT User acceptance testing
Stage/Pre-production Mirror of production environment
Production/Live Serves end-users/clients