Well it could be the description of my teenager's room at the current time.
But in the appraisal industry gross living area is the total continuous area that is considered to be typical living area for the market, excluding attached porches, patios, garages, etc.
The word continuous means that all areas are accessible to each other without having to go outside, through a porch, a garage, or any other means to get there. Therefore, if the handyman (or woman) of the family decides to add a 2nd floor to the garage so that Cousin Billy can have a home away from home, that may not be considered in your living area when the appraiser comes to call, and therefore may not add real value to your home. Again, it depends on your market. If every other home on the block has an above garage quarters, and there is proof that these homes are selling $5,000 more that a standard home without these quarters, you may be in luck. Usually, that doesn't happen, and you really are stuck spending more than what you're going to get back from the market.
This also goes for detached (mother-in-law) quarters. Some market's show absolutely no market value for the little (or big) place you built for mom in your backyard.
Attached quarters also fall into this category. Remember, just because the walls are touching doesn't make the area part of your main gross living area. Most people don't want to sprint out in 10 degree weather to go to their attached bedroom, which is on the other side of the garage. This is just not typical of most homes, and should not be considered gross living area.
Finished attics with insufficient head room can also be nixed. If you finish an attic, make sure that an adult can stand without bumping their head on the roof inclines. Not fun - and you will be dinged on the gross living area by the appraiser.
So when you're feeling like Bob Vila, and want to knock a few walls down to add on, make sure you consider the accessibility of all living areas.