The ability of a system to increase its processing capacity by adding more resources. It can be vertical (more power to the same server) or horizontal (more servers).
AZ-900 and CLF-C02 test the difference between vertical scaling (scale up) and horizontal scaling (scale out). The cloud facilitates both, but horizontal scaling is the recommended architecture for high availability.
Scalability is a concept that can show up on the exam. Check the full guide to see it in context.