To play a shorter shot than normally might be attempted. Would be done to achieve a good lie short of a hazard rather than trying to hit the green in one less shot.
(aka: "lay back", "play for position") a shot played to a particular location to allow for an easier subsequent shot or to keep the ball from going too far and getting into trouble. Example: "I didn't hit a very good drive so I had to lay up to the water before trying my approach into the green."
Choosing to hit a shot shorter than you are capable of in order to avoid a hazard or to position the ball in a certain spot.