What does app configuration mean?
To "configure your app," generally speaking, is to specify, via some mechanism, parameters that can be used to direct the behavior of your app at runtime. Additionally, in the case of Google App Engine, these parameters can affect the behavior of the framework and services surrounding your app.
When you specify these parameters, and how you specify them, depends on the app and the framework, and sometimes also on your own philosophy of what needs to be parameterized. Readable data files in formats like YAML are a popular choice, particularly for web applications and services. In this case, the configuration will be read and obeyed when your application is deployed to Google App Engine, or launched locally via GoogleAppEngineLauncher.
Now, this might seem like a lot of bother to you. After all, the easiest way you have to change your app's behavior is to simply write code that implements the behavior you want! When you have configuration via files, it's generally more work to set up: something has to read the configuration file and twiddle the appropriate switches/variables in your application. (In the specific case of app.yaml, this is not something you have to worry about, but Google's engineers certainly do.) So what are some of the advantages of pulling out "configuration" into files like this?

Configuration files like YAML are relatively easy to edit. If you understand what the parameters are, then changing a value is a piece of cake! Doing the same thing in code may not be quite as obvious.
In some cases, the configuration parameters will affect things that happen before your app ever gets run – such as pulling out static content and deploying that to Google App Engine's front-end servers for better performance and lower cost. You couldn't direct that behavior from your app because your app is not running yet – it's still in the process of being deployed when the static content is handled.
Sometimes, you want your application to behave one way in one environment (testing) and another way in another environment (production). Or, you might want your application to behave some reasonably sensible way by default, but allow someone deploying your application to be able to change its behavior if the default isn't to their liking. Configuration files make this easier: to change the behavior, you can simply change the configuration file before you deploy/launch the application.
I am working on Google App Engine (GAE) which has a file called (app.yaml). As I am new to programming, I have been wondering, what does it mean to configure an app?