The term "division of labor" refers to a system in which people become more and more specialized in terms of the work they do.
The term is most often used to refer to the way that a given product is made in today's world. Our production processes tend to involve people doing very specialized tasks. We do not, for example, have one person doing the whole process of making a car. Instead, we have assembly lines where each person performs one step in the making of a car and does so over and over.
This is division of labor--when people become more and more specialized in the jobs they do.