Population in Sins of a Solar Empire represents planet-side native Humans and factional settlers who inhabit the ruling Empires' cities as tax paying citizens. Always be sure to build more cities for these citizens on the planets you colonize as this eliminates the Planetary underdevelopment penalty and allows you to gain a positive Tax income.
The population could also represent the local/loyal governors reporting their taxes, tax collectors doing the same, or the number of surface settlements that are under your control.