Loaf has two main meanings:

1. A shaped mass of bread that's baked as a single piece. When you buy bread at the store, it often comes as a loaf that you slice at home. A typical loaf is rounded on top and flat on the bottom, and might weigh a pound or two. The word can describe other foods shaped the same way, like meatloaf (ground meat mixed with other ingredients and baked in a loaf shape).
2. To spend time doing nothing useful, or to avoid work by moving slowly and lazily. When someone loafs around the house all weekend, they're not being productive or helpful. If workers are loafing on the job, they're pretending to work while actually wasting time.

The word loafer can mean someone who habitually avoids work (though it's also a type of casual shoe). When a teacher tells students to stop loafing and get to work, the teacher is noticing that they're dawdling instead of focusing on their assignment.