The phrase is an observation that most of the kingdom's subjects either served in the army or fulfilled a role in maintaining it.
The Prussian kingdom became highly militarized under the rule of Fredrick I and particularly his successor Fredrick II. During their reign, the Prussian army grew to number 200000 men out of a population of 2.5 million. Fielding such a disproportionately large standing army was an amazing feat for the time.