What is meant by the Nexus S being a "developer Phone"? I have heard lots of times that the Nexus S is a "developer phone". What exactly does it mean?
It primarily means that the boot loader is unlocked so it is much easier to upload ROM's for testing. Additionally the default installation will be the original AOSP version of the code and include root access to the phone's software.

It does not mean that the hardware is a "test" model. It's a fully developed phone. What it doesn't have is more important than what it does have. What it doesn't have is the additional locks and proprietary junk that a carrier modified phone normally has.