It points to namespace and assembly where View Model class is defined. So lets say you have project A with XAML files and project B with View Model. You have to add reference in project A to project B and define namespace in XAML (xmlns).
So for example in my game i have project EmptyKeys.Strategy.UserInterface with all view models for UI. Then I have project HudControls with XAML files. This project has reference to EmptyKeys.Strategy.UserInterface project and in XAML:
Don't forget to use -bd and /generate-bindings command line options for UI Generator. I use this in post-build event:
$(ProjectDir)..\..\EmptyKeysUI\Generator\ekUIGen.exe -i=$(ProjectDir) -o=$(ProjectDir)..\Strategy\Game\GeneratedUI\ -oa=$(ProjectDir)..\Strategy\Assets\Shared\UI\ -bd="$(TargetDir)\" /generate-bindings
-bd option tells UI Generator to copy assemblies needed for build of XAML file. If everything is OK, you should see .xaml_bindings.cs files in your generated UI directory.