This phrase means to do something when you're at home, and other people aren't around. People use this phrase to talk about whether it's OK to do something. For example:
If someone wants to do drugs in the privacy of their own home, I don't see why the government should try to stop them.
You can also use this phrase if you want to talk about something that's OK at home but not in public:
I don't care what you do in the privacy of your own home, but you'd better watch what you say at work.