"Military grade encryption" means that the government has signed off on the algorithms use for information up to a specific classification level. Probably the NSA, but maybe the DOD has their own department. It's certainly a vote of confidence, probably by people more educated about cryptography than you specifically, although possibly less trusted by you (in terms of skill and/or ulterior motives) than other people.
A big, undisputed, downside is that newer algorithms take longer to be approved and it's possible that people keep using the term after algorithms get deprecated.
Encryption is more like "milspec", meeting military minimum quality guidelines than "military issue" which is the cheapest implementation of milspec in physical (or electronic for that matter) goods.