It means what it says, literally.
Suppose I am looking at two packages of coffee in a supermarket. On one shelf, I see a bag of Folger's coffee, all in a single bag, 400 gm at a price of USD $3.00. On another shelf I see the same coffee packaged as Keurig "K-cups" (for making coffee one cup at a time in a Keurig machine). The box holds a dozen K-cups, and the package says the total amount of coffee is 100 gm. The price is $9.00. If I buy the coffee in the K-cups, I am paying more for less. I am paying more ($9.00 instead of $3.00) for less (100 gm instead of 400 gm).
Someone might say "Don't use K-cups. If you do, you are paying more for less."
In marketing and behavioral economics, it can refer to a specific paradoxical effect found by some researchers, in which subjects were shown things and asked how much they would be willing to pay for them. When subjects were shown a bundle of an expensive watch and a cheap pen, they would name one amount. When they were shown the expensive item by itself, they would name a higher amount, even though they were getting less. They were willing to pay more for less.