Just like you said, vegas sets a line that gets roughly half the money on each side of the bet, so in other words, they set the line at the consensus midpoint. Right in the middle of what all the sports bettors think.

So in essence Vegas betting lines tell you what the general (betting) public thinks the outcome of the game will be.

That's what people mean by "vegas" getting it wrong. General (betting) public gets it wrong.