It means your BMI is “normal”, but it’s normal because you lack muscle to offset having more fat than ideal.

I believe it's using "fat" as a catch-all term for an unhealthy body composition. You appear skinny but lack muscle. I don't think you necessarily have to have "hidden" excess fat to be called this term.

Thinner and softer; noodle arms. You can be thin or lean, but skinny-fat is marked by soft muscle.

Typically it's more like thin but with poor muscle definition. Not overweight but not fit.

But assuming the gp was exercising with weights etc, they might mean that they felt they weren't overweight but were carrying excess fat in certain areas, or considered themselves bloated.