It usually refers to players or mobs with custom heads, like skulls used for decoration.
In multiplayer, head drops are used as trophies or cosmetic collectibles.
There’s also the Wither Skeleton skull, which is needed to summon the Wither boss.
In PvP servers, “head drops” can be a setting where killing players gives their custom head.
Custom heads can be summoned with commands using player names or generated IDs.
Some builders use them to decorate kitchens, arcades, or item shops.
The term’s kind of slang but it comes up a lot in survival and roleplay communities.