when people say Security Theater, just what do they think they mean?

Security Theater is a  terrible metaphor.

In theater, you suspend disbelief, sure, but that's so you believe  the characters are real, and  that the  characters are subject to true motives and actions are  in reaction too circumstances in  the universe of the play.

So when Macbeth falls for his personal initerpretation of the 3 witches predictions, this is true. and when Burnham Wood is come to Dunsinane, the attack/deception works.

Even the  twist at the end of a whodunnit like the venerable Mousetrap, or the   clever Sleuth (or indeed Whodunnit) catch you by surprise. 

If security  operatives employed techniques like this, they  would essentially be carrying out a mix of

a) real security

b) social engineering on the adversary.

No,  what people really mean is like the well-meaning uncle who says he'll entertain a room full of 9 year  old kids full of sugary drinks with a very  bad conjuring show that  they immediately see through. Not tragic or comic, not even really bathetic or pathetic. Just bad.

People go to the theater to be taken out of themselves. What people call security theater is stressful because it is transparently useless and incredibly boring at the same time. 

When you go parachute jumping or scuba diving and check your equipment, it is quite interesting. That's because theatrics only happen if you don't.