It's similar to phrases like:
* "Fiddling around"
* "Dicking around"
* "Fooling around"
It implies a lack of focus or purpose, and often suggests a frivolous or unserious activity.
Here are some examples of how it might be used:
* "I spent the whole afternoon putzing around on the internet, and I didn't get anything done."
* "Stop putzing around and get to work!"
* "I was just putzing around in the kitchen, making a snack."
The word "putz" itself can also be used as a verb meaning "to clean", but in this context, "putzing around" has more to do with the action of being busy without much purpose.