You've got it right. Bokeh is the out-of-focus part of the photo, usually the background. Lenses vary in the the quality of the bokeh they produce. If you check the lens-test sites, some of them rate the esthetics of the bokeh such as velvety, buttery, or too much flare, etc.
I don't really understand what bokeh is, but I'm guessing it's something like this judging from other pictures I've seen. Photo taken at Logan pass in Glacier National park. C&C welcomed.