It means the horse is two pounds out of the ‘handicap’. Due to the fact that its rating takes it below the minimum weight to be carried in the race it has to carry more weight than it should. In the example you give it’s slightly complicated by the fact that it’s also carrying a pound of jockey’s overweight, and also that Natalia Gemelova was claiming 3 pounds allowance!
Make Up’s official rating for the race was 56. Because the original top weight (ironically a non-runner) was rated 81 and carrying 9-7 then taking 25lbs off would have meant Make Up would be set to carrying 7-10. Since the minimum weight for the race is 7-12 then he has 2oh (2lbs over his handicap weight). Natalia Gemelova’s claim should have reduced his weight to 7-9 (3lbs less), but she could only ride at 7-10, hence the 1lb overweight as well as 2lbs out of handicap.