The inductor1 and inductor2 are the names of the two coupled inductors found elsewhere in the circuit, and value is the coefficient of coupling, K, which must be greater than 0 and less than or equal to 1. Using the ``dot'' convention, one would have a dot on the first node of each inductor.
This formulation applies when the referenced inductors are linear. The model is probably not exactly correct in the case of nonlinear inductors, but results may be close enough in some applications. In general, use of mut with nonlinear inductors is not recommended but allowed.