What does it mean 'to build a VPS/Server'?

When we talk about 'building a VPS', we're actually referring to the work involved between the installation of the operating system and putting the server live in the production environment.

To re-phrase this; The server is delivered to you with just the operating system installed and if you want to use it for a web server, you would need to install the webserver software (often Apache webserver). You might also want a mailserver on the same machine and quite possibly a bunch of other applications (MySQL, ClamAV, etc.). The process of installing and configuring those is what we call 'building the server'.