To make things clearer, look at the picture below.
We can see that the dummy power (or the theoretical power) is the area in red, and the actual power is the area in the blue. The fill factor is the ratio of the blue area to the red area. The higher the fill factor of a solar panel, the closer the blue curve is to the red curve.
One can say that a higher FF solar panel has less parasitic losses, ie, losses due to the series and parallel resistances within the cell itself.
When commercial solar panels are labeled, they take the FF into account, and only measure the real power. When hobby cells are labeled, you will see that most of the time they will just states the short circuit current and open circuit voltage.
Please refer to this document The physics of solar cells
for a more detailed explanation.