Does it refer to the cross-sectional area that light actually occupies?
This is a very core and easily misunderstood concept in guided-wave optics and nonlinear optics.
Simply put: It does not refer to the cross-sectional area that light ‘truly occupies and is physically confined by’ geometrically.
To rigorously understand this concept, we need to analyze it from two dimensions: electromagnetic field distribution and equivalent physical effects: