Imagination, in my mind, is part of what makes us human - the potential to perceive possibilities not just current reality is a phenomenal talent that humans have in abundance which is why humans are so good at creating new things and ideas. And people on the spectrum seem to actually have more ability in this area than most.
It really doesn't matter whether or not that imagination is based in reality or fantasy.
The thing is, when the diagnostic criteria were first created it wasn't understood that there are multiple forms of imagination, just like there are multiple forms of intelligence, so when professionals noticed that people on the spectrum struggle to place themselves in other people's shoes (imagining what someone else is feeling or thinking) they dubbed it "lack of imagination".
If you talk to most professionals now you will find a very different response on imagination - rather than lump all imagination in together, they recognise that autistic people are one of the most creative and imaginative groups of people on the planet but that there is one area of imagination they struggle with in particular.
Omid hit on this precisely - when they talk about lack of imagination they mean social imagination.....
As a professional myself, I would never suggest that anyone I work with lacks imagination, in fact exploring imagination is one of the most fascinating things about working with autistic people because so many are fantastic at thinking outside the box and I love where their minds can take mine, but I do understand that one of the main barriers to easy social development is poor social imagination and building strategies and awareness to help with that is absolutely essential for most people on the spectrum.