It's a bit like the term "blockbuster" in film. Originally it meant a movie so good, lines to see it would go around the block. These days what it actually means is a huge-budget film filled with CG and spectacle, and studios labor under the belief that throwing that much money at a production will lead to blockbuster-scale ticket sales. Then they wonder why their "blockbusters" flop catastrophically at the actual box office.
To give an example, no one calls Pillars of Eternity a AAA game despite it being raved over by gamers. The reason is simple. It didn't have an overly large budget, it had just a single artist.
People expect high quality to come from a big budget and that's completely reasonable (not duplicitous in any way). But the term still means a large budget. No one with much familiarity with the industry would argue otherwise.
I think the misunderstanding comes about from those who don't pay too much attention to the gaming industry as a whole misunderstanding the meaning because they guess at it via context and get it wrong. There is absolutely an implication of quality, but it is not a part of the definition of the term.
*This might not be true in cases of outright corruption or incompetence.
You're spot on about the term blockbuster. Same problem there. "Blockbuster" now means high budget and mass market.
They are produced like movies. Throw insane amounts of money at an idea. More money, more insane things are possible.
But games don't actually _need_ lots of things, so much complexity or licenses for soccer teams/car brands. For me AAA games make no sense, and their economy makes even less sense.
Or for the ultimate in non-AAA gaming, Dwarf Fortress. Looks like Nethack, plays like AutoCAD, devours time like nothing else.