I'm pretty sure it refers to how what's represented in the story is similar to what you actually get in gameplay. More accurately, when I think of separation of story and gameplay, I think about all the sweet stuff you see in cutscenes, then you find out that you can't really do that in the game.
Example: Final Fantasy VII: Dirge of Cerberus. In cutscenes, we see Vincent doing awesome ninja moves, flipping around, firing in mid-air, generally being the badass that earned him the game. Then you start playing and... well, you can fire. And I think there are dodge rolls.
The question is basically asking how important, to you, it is to be able to actually do all the stuff you see in the cutscenes, or what the game tells you a character/weapon/macguffin should be able to do.
Personally, I only have a problem when the difference between gameplay and narrative is entirely too large, particularly when we're talking about your own character.
Example: In Mass Effect 2, Jack and Samara are introduced as being unstoppable biotic death-machines, and Miranda is genetically engineered to be perfect. The problem is that they're all just as prone to being full of suck and fail, and they all have to be leveled up just the same as everyone else. On the other hand, Shepard (you) is shown only firing guns in cutscenes. And guess what? In actual gameplay, you fire guns!
Gamers who are more discerning than I will likely cluck their tongues at the problems with Jack, Samara and Miranda, but personally, I'm just happy the game doesn't have cutscenes of Shepard pulling off all kinds of badass moves that are mysteriously impossible as soon as I take control. Hell, you can actually do MORE in gameplay, since the cutscenes never have Shepard utilize whatever abilities may be available.
Anyway, that's pretty much how I feel about separation of gameplay and narrative/cutscene. It's fine as long as it doesn't apply so much to my character.