It means Successor. This is to be a leader following in the footsteps of Muhammad. He is to be the leader of Muhammadan Islam both in the military and the religious fields. In the latter sphere, he is to be the protector and guardian of all Muslims and their beliefs.
He is supposed to safeguard the ordinances of theSharia(Quranic Law) and to put them into practice as Amir al Mu'mineen(Leader of the Believers). He is not a priest or a pope or anyone of a religious status. His purpose is to protect the theology and its followers.
To do so, he would use the military resources at his command when necessary since he is also the Commander in Chief . He is a secular leader who would see to it that the laws and regulations and observances as given by the Quran, are followed and observed by the Muhammadans under his leadership.
He is also the protector of the two sacred places (al Haramayn) of Mecca and Madina. The Caliph is also empowered to declare a Jihad (Holy War) against any and all who would threaten Muhammadans or their territories, as well as to conquer as many lands from among the Unbelievers to bring them under Muhammadan Islam.
The position should have been an elective and not a dynastic one. Muhammadan leaders, succumbed to evil temptations and allowed themselves to be seduced into creating undemocratic, un-elected dynasties instead.
Upon the death of Muhammad, his mantle (Khilapha/ Successor) fell to Abu Bakr, his father in law . Muhammad did not designate any one as his follower. That was his greatest mistake, because after his death, all hell broke lose among all the newly converted Arabs.
Each group tried to arrogate for itself the immense powers, religious and secular that he had held. Those powers acquired with them great economic advantages also.
Immediately after his death, several false prophets tried to take up his mantle. Abu Bakr, with the general-ship of Khalid ibn al Walid(Sword of Allah) was able to bring the seceders to the fold through a sea of blood.