I'll give a simple answer as it pertains to German rifles. It's the size of the receiver ring. Two different designs.
A large ring is what most know. Think Gew98/Kar98K. It's a heftier ring, stronger, etc.
A small ring would be, as the name suggests, thinner diameter. A small ring action is on the Kar98a and G33/40 rifles.
Google pics and you'll see.
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