I believe he's referring to a Single Board Computer.
I believe you're correct.
I am also surprised at Grumpy_Mike, mowcius, and MikMo for -not- knowing this...
:-?
Though I guess we all have our areas of interest and knowledge; all's good...

Regarding SBC's, though - while I suppose one could define the Arduino as an SBC and the ATMega as the microcontroller, I am not completely certain the Arduino can be technically classed as a true SBC.
This may be a personal bias, but I tend to think of an SBC as a single PCB with a microprocessor (such as a 6809, Z-80, 68000, etc), plus additional peripheral chips (MMU, address decoders, RAM, EPROM, etc), to make a "Single Board Computer"; the KIM-1 of eons past was an SBC, today's PC/104 boards are SBCs, the BeagleBoard is an SBC.
I also think of SBCs as being more general purpose, and generally having less dependence on the Harvard architecture for memory usage (I realize that modern CPUs all use a variant of HA internally, but for the most part this goes unnoticed by most programmers - whereas on many microcontrollers, like the ATMega, where HA is -very- apparent and noticed by the specific segmentation of memory into "program code", "data", "ram", etc).
Really, it doesn't make sense to ask if the Arduino can be made into an SBC; as a microcontroller technically -is- an SBC, shrunk down to a single IC. That doesn't mean it wouldn't be possible; I can envision setting up the data ports on a ATMega to act as address lines, r/w and control lines, and data lines, connected as a bus to other peripheral chips (ram, rom, eprom, etc) - but it doesn't make much sense to do it, especially since these functions can also be done using a fast serial bus (SPI or I2C). Plus, since the ATMega uses the Harvard architecture, you wouldn't gain anything for program running space, only extra data storage space.
Which brings up another point: Are there any Atmel processors that could be used and ported to the Arduino platform that -do- support external memory for expansion of program -and- data storage space? Are there any that support code execution from an external eeprom or other memory device? It would certainly be nice to have an 8-bit microcontroller with the ability to expand its memory up to the limits of its address space (without it being "pre-defined"); also, if such a thing were possible, you could do a segmented/paged address scheme to expand beyond that limit (boo, hiss, I know it is a hated thing, but you gotta admit its a slick hack - especially when it was common back in the day, when RAM was DIP-based and expensive!).
