This refers to the proposition that unless people are special in some way, nothing can make them happier than the next best alternative. So, when they have to choose between two different choices, people prefer one over another until a point when they turn indifferent to both.
This happens when the marginal utility that they derive from the initial choice drops gradually until it equals the utility derived from the alternative. A child, for instance, might prefer chocolates to ice cream until he has had too many chocolates.
The indifference principle was proposed by American economist Steven Landsburg in his 1993 book The Armchair Economist.