1. Literally it means someone who has sex with his own mother, but this word is hardly used in this context(Just like when you call someone a bastard, you don't mean he is a bastard child, when you call someone a mother fucker, you are usually you are not implying that he is someone who sleeps with his mother).
2. The mother of all fuckers(this is what people actually mean when they call someone a mother fucker).