I just posted this in my forums in response to this question and thought that you might be interested to read about it. Below is my response.
I was just writing a chapter in my book about this very topic. Yes, it starts with the obvious level of calm and relaxed, but it actually refers to the regulation or calmness of the nervous system (which includes the network of nerves that run up the spinal cord and into the base of the brain that is connected to the rest of the body- we're talking about body level regulation here). When a person is upset, overly tired, cold, shocked in some way (like when the water for the shower is too cold), it is dysregulating at the level of the nervous system. If someone is saying that he is calm, but his palms are sweaty, his heart is racing, his stomach is upset, he is dysregulated on a body level and is thinking in part of his brain that he's calm. That's not what we're talking about.
Dysregulation can show up as hyperarousal or hypoarousal. Hyperarousal would be throwing things, classic ADHD, yelling or screaming- outward expressions of dysregulation. OR as hypoarousal, which is a shut down state. We tend to get less excited about a person who shuts down, but this person is just as dysregulated.
Regulation is learned through relationships, generally in the first 3 years of life when parents respond to their children's upsets with calm presence 100,000+ times and the child learns to do this for themselves. With high need children (i.e. emotionally reactive children, particularly those who have experienced early trauma of any kind), it takes much longer than this for them to learn to calm themselves down after a stressor. Regulation can also be taught to grown-ups, though, and it is never too late to learn. Our parents couldn't give us what they didn't have, but it doesn't mean that we're doomed to live a dysregulated life if it didn't happen.
Regulation is one of those things that is talked about very little in parenting books, but it is utilized by literally every scientific discipline. AND, chronic dysregulation, or the inability to calm oneself down after a stressful event (which can be anything, including being unable to tie his shoes the way he wants) is correlated to nearly every psychiatric disorder.
Such an important concept, yet it is strangely absent from parenting information.
To teach regulation, we need to be able to regulate ourselves as parents. When stressful things happen, we need to be able to remain calm all the way through, not just on the surface, in order to help calm another person's system. It takes connecting through relationship, which can be challenging when the other person is big and angry. But it is possible. And indeed, it is the only thing that really works.
AND when a person is dysregulated, we are not fully in our rational thinking brains anymore. We actually lose IQ points and the ability to reason. I'm sure this is something we've all experienced. Ever try to find your car keys when you're in a hurry and you're upset? Rarely does it work well.
So, that's an explanation of regulation (and dysregulation) in a nutshell. I could go on all day and all night about this (and indeed, I probably have in the past!). Feel free to ask any questions that come up for you as you read. I'm more than happy to explain this and to help others understand. That's why I'm here doing this!!