"Canon" refers to facts in a fictional universe from "official sources". Head canon, by comparision, is a made-up fact that is NOT part of the official canon but is extrapolated from it. It's another way of saying that this is a version of the fictional reality that I believe would be true, at least in my own head.
I use the term when I'm making-up a cause-effect chain that I know isn't really supported by research or published fact, but nevertheless feels true to me.
References
- Fandom Glossary - Vox