It usually means that they connect through the bottom of the iPod, where you usually conncect the cable to the computer when you are syncing. Most of them have aux inputs as well, so they can be connected through the earphone jack as well.

I have an iPod and it sounds better docked than using the aux input. Although by better, I mean I don't have to turn up the volume as much.

Ipod isn't supposed to be used as a generic term. If you see on the box "Made For Ipod" with a drawing of an Ipod, it's part of Apple's "Made For Ipod" program - products with this logo mean that it is specifically for iPod. But speakers in this program usually do have aux inputs.