What do the symbols M and N mean in this definition of lambda terms?
I suggest you read the page following the supposedly cryptic notation:


  The above Backus-Naur Form (BNF) is a convenient abbreviation of the following equivalent, more traditionally mathematical definition:
  
  Definition. [...]


In said definition, it is stated that $M$ and $N$ are simply arbitrary lambda terms. (In a nutshell, it is an inductive definition.)

As to why the author prefers this notation, it is stated right after the definition:


  Comparing the two equivalent definitions, we see that the Backus-Naur Form is
  a convenient notation because: [...] the use of distinct meta-symbols for different syntactic classes ($x$, $y$, $z$
  for variables and $M$, $N$ for terms) eliminates the need to explicitly quantify over
  the sets [of variables and lambda terms].