Productization means turning the software into a "whole product" -- providing all the pieces that are necessary for mainstream users to get value from the software. This includes documentation, support and training. It also involves some type of branding (how people identify the product, like logos and company image). Occasionally, it is comprised of physical packaging. Ideally, all of this will be put together with a good understanding...
of exactly who represents the market for the product, so that the specific needs of that market are satisfied.
Is it important to open source projects? It depends on your goals. If the project meets the needs of a small community of developers, and you want to keep it that way, then productization is not so important. But if the project's goal is to become useful to a mainstream audience, then it's absolutely critical. Open source software is really no different from proprietary software in this regard.
Think of it from the average user's point of view. You have an afternoon to investigate three or four options for a software solution you need to deploy. You don't know the ins and outs of the code -- you just came upon this assignment and you need a solution fast. One by one, you go down the list of recommended solutions. If the documentation is weak, the install process didn't go smoothly, the project site looks amateur-ish, and there is no commercial support available, you are likely to skip this one and move on to the next one in the list. Mainstream users typically don't have either the time or the inclination to tinker with code, so the "whole product" is especially important for both open source and proprietary software.
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