Lug spacing is the internal distance, measured in millimeters, between the two attachment points of the case where the spring bar passes through. It is not the width of the lug itself, which can be considerably thicker: it is the free space between the two facing lugs. A distinction that seems pedantic until you pick up a caliper.
Three overlapping terms circulate in English: lug width, lug spacing, and strap width. Technically, lug width describes the thickness of the individual lug arm, not the spacing between them. Lug spacing and strap width instead indicate the space between the lugs, which is the actual operative measurement. Manufacturers use the three terms interchangeably, which generates constant confusion in forums and technical specs. At the workbench, I have always stuck to the actual measurement taken with a caliper, whatever label was given to it.
The most common values are 18, 19, 20, 21, and 22 mm. The 20 mm covers the majority of mid-range sports watches produced from the 1960s onward. The 22 mm is common on dive watches with generous wrist presence. The 21.5 mm of the Fifty Fathoms or the 21 mm of some Big Pilots are non-standard measurements born from precise design choices that have historically complicated the lives of accessory departments. The 24 mm of Panerai is a case unto itself: it derives directly from the military roots of that case, designed to be worn over a wetsuit.
The measurement is taken with a sliding caliper inserted between the lugs, at the level of the spring bar. It should not be measured at the free end of the lugs, where the case often widens or narrows for aesthetic reasons. This is the most common error I see even from those who have been selling watches for years. The correct measurement is at the contact point with the spring bar, because that is where the strap or bracelet must fit without play and without forcing.
On the design side, lug spacing influences the visual proportions of the case as much as the diameter does. A narrow lug spacing on a wide case creates formal tension. Case designers use this consciously to alter the perception of overall dimensions.