It means that test scores are used to determine punishments (such as sanctions, penalties, funding reductions, negative publicity), accolades (awards, public celebration, positive publicity), advancement (grade promotion or graduation for students), or compensation (salary increases or bonuses for administrators and teachers).
A high-stakes test is any test used to make important decisions about students, educators, schools, or districts, most commonly for the purpose of accountability—i.e., the attempt by federal, state, or local government agencies and school administrators to ensure that students are enrolled in effective schools and being taught by effective teachers.