It’s simply a term for all the ocean-going commercial ships (passenger liners, freighters, tankers etc) registered to the country’s flag. Many countries organize the officers of their merchant fleet on a quasi-miltary basis, e.g. the US has a Merchant Marine Academy for training such sailors. The reason why the term is less used today, at least in the English-speaking world, is mostly because most commercial ships are for economic reasons now flagged to countries in the developing world with much less stringent regulation. These are sometimes called “flags of convenience”.