The "context" means the context that the function is called in -- whether the values of the function will be used in list or scalar context.

use strict;
use warnings;

sub what_do_you_want {
    print wantarray ? "list\n" : "scalar\n";
}

my @list = what_do_you_want();   # prints "list"
my $scalar = what_do_you_want()  # prints "scalar"
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use strict;
use warnings;
sub foo { 
        if (wantarray()) {
                print "Want!\n";
        } else {
                print "Don't want!\n";
        }
}
my $bar = foo();
my @baz = foo();
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Actually, wantarray has three distinct return values: true, false but defined, and undef. These correspond to list context, scalar context, and void context.

sub fred { 
    ...
    unless( defined wantarray ) { ...void context }
    elsif( wantarray )          { ...list context }
    else                        { ...scalar context }
    }
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You then ensure you're calling fred in the right context.

fred();               # void
my $fred    = fred(); # scalar
my( $fred ) = fred(); # list (because of the parens)
my @fred    = fred;   # list
print fred();         # list, print is a list operator
print scalar fred();  # scalar
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For instance, you might look at Hook::LexWrap (or my TPJ article on it: "Wrapping Subroutines to Trace Code Execution".