IIRC, linearity is when you put a sound wave frequency into the medium (air) a some point, you can predict the frequency of the sound wave at some other place using a linear function - meaning that there is no distortion. Non-linear is when the physics of the medium starts screwing with that function.
I believe that it means that the superposition principle (http://en.wikipedia.org/wiki/Superposition_principle) doesn't hold: the net response at a point is not just the weighted sum of the individual responses.