It's a parameter for the Exec key in .desktop files (defined in the Desktop Entry Specification) that describes how arguments to the program (from the file manager/program launcher, e.g. multiple selected files) should be handled:
%u A single URL. Local files may either be passed as file: URLs or as file path.
%U A list of URLs. Each URL is passed as a separate argument to the executable program. Local files may either be passed as file: URLs or as file path.
which means that arguments to gedit will be treated as a list of URLs (or local files).
For a complete list of possible parameters, see The Exec key.