It means to take a player off their roster... to be released.
outright released is the full term, there are other less-direct forms of releasing, such as designating for assignment... but this is just flat-out releasing a player.... taking him off your team (although if they have a contract, you still have to pay them)
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It's when a manager removes one of his players from the 40-man roster and sends him down to triple-A for a certain type of job, such as a hitting coach or bullpen pitcher.