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What do "hotter output" and "headroom" (with regards to signal) mean in the following excerpt from an M-Audio Troubleshooting page?

Along those same lines, the M-Track 2X2 and 2X2M were designed with a slightly hotter output than your garden variety audio interface. If you are experiencing unwanted audio artifacts in your output when setting the USB/Direct knob all the way to USB, simply back the knob away from USB slightly to give your signal more headroom.

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In layman's terms a hot signal is a loud signal, though the two terms are not completely synonymous (source). Technically the hotter the signal the higher the amplitude or voltage you have.

Now if your signal voltage is greater than what your destination input can handle, you'll start to hear distortion (clipping) of some sort (and in some cases you may even damage the device or devices/speakers further down the line).

That is why you need a bit of Headroom, which simply means that your input peak voltages ("hotness") should be less than the level at which the device starts to distort.

So what they are saying is:

Our product plays louder than others - if things start to sound bad (distort), try turning down the output volume a little.

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Supposedly derived from meter-displays, this is as fuzzy as a lot of meters are diverse. Most of the time hot will mean higher absolute peak voltage.

Given as a statement of quality for an audio-interface I would read it as "able to be connected to a lot of different devices / cables" (i.e. can drive low impedances without distorting)

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