It usually means they have payroll and processes around taxes implemented in the US only. They might be unwilling to take "contractors" who are actually full time employees from other countries since in those scenarios they still have tax obligations. For some countries in the EU, such as Germany, you're unable to "contract" someone full time since the "employee" isn't actually self-employed and it would enable them to deduct a bunch of tax items that actual full time employees wouldn't be able to. In those countries, as a real contractor you can't have all your income coming from one company. If you apply this thought process to countries that are in the same TZ as the US, you can see that HR would have to look into a lot of legalities in those countries, keep up with the legalities, and calculate the risk of those laws changing. I'm extensively using quotations because contractor/employee is fuzzy in these scenarios.

This is coming from a Canadian that dislikes the "Remote US Only" clauses when I see an awesome company hiring.