Sounds like they're distinguishing between the .class files in your web app, packaged in a WAR file using the standard WEB-INF idiom, and those on the app server itself (e.g., in server/lib and common/lib for Tomcat 5.x and lib for Tomcat 6.x).
The important thing for you to know is that Tomcat has a hierarchy of class loaders. You need to understand how they work to use Tomcat effectively.
UPDATE: If understanding CLASSPATH is your issue, you need to know that anything WEB-INF/classes and in JARs under WEB-INF/lib in your deployment are in the CLASSPATH, along with JARs that are installed on your app server that all deployed applications share. That's what I meant when I said common/lib and server/lib for Tomcat 5.x and lib for Tomcat 6.
I don't think I understand what your question is. Do you not understand CLASSPATH? The CLASSPATH is all the places that the JVM knows to look when it needs a .class file that hasn't been loaded yet. That includes the JARs available to all applications deployed on Tomcat and WEB-INF/classes and WEB-INF/lib directories for your particular deployment.