There's sort of a convoluted history behind that indicator... As far as I can determine, it was actually born out of an internal discussion as to what sorts of activity we should be looking for when choosing Pro Tempore mods. There's an employee-only page with similar stats for all active users, and those are the sorts of activity we look at when picking mods for a new site.
The underlying motivation for putting it on the mod dashboard is simple: we want moderators to be at least occasionally active in chat. So like every other behavior we're hoping to encourage, we put that on the dashboard: the theory is, if you see your peers looking more active than yourself, you'll be motivated to step up your game a bit.
Unlike the rest of the stats on that page, there wasn't an easy way to query the number of chat posts made by a user in the past day/week/month/etc. So we had to be content with those badge indicators. They're... better than nothing, but don't exactly convey quite what we'd like them to.
We're gonna have to rework that page at some point anyway - it's almost useless on Stack Overflow right now (because SO mods' stats are too awesome for our puny queries), and badges are the least of the problems there. When that happens, we may take another look at what sorts of information we can pull.
Until then, think of it as an object lesson in Stack Exchange UI norms: if you don't know what something is, hover over it.