It's actually defined on the first page:
... sparsity level (ratio of observed to total ratings) ...
In other words, the fraction of the user/item rating matrix that is not empty. Remember that the problem is that most user-item pairs have no rating, and we wish to estimate them.
Example:
Let there be three users and four products. The number of possible ratings is 3×4=123×4=12. If every user rates only one product each (regardless of which product), the density is 3/12 = 25%.
参考资料: