What does "dead as a door nail" mean?

It would not be right to discuss this idiom without reference to this quote from the opening of Dickens's A Christmas Carol:

Mind! I don't mean to say that I know, of my own knowledge, what there is particularly dead about a door-nail. I might have been inclined, myself, to regard a coffin-nail as the deadest piece of ironmongery in the trade. But the wisdom of our ancestors is in the simile; and my unhallowed hands shall not disturb it, or the Country's done for. You will therefore permit me to repeat, emphatically, that Marley was as dead as a door-nail.

Dead as a doornail is one of the many idiomatic similes used for emphasis (to intensify the adjective). Thus, it simply means dead, very dead, quite dead, certainly dead, etc. It can be used figuratively or literally in any context.

Another simile that comes to mind is poor as a church mouse, which simply means dirt poor, very poor, flat broke, etc.

I'm sure Cambridge and Longman still publish compendiums of English similes, proverbs and idioms. They're fun to peruse.

From the New Oxford American Dictionary:

doornail (noun): a stud set in a door for strength or as an ornament.

(as) dead as a doornail: quite dead.

Note that it is “doornail” with no space.