It's compared to the energy it consumes. For example, a COP of 3 (roughly translated to efficiency of 300%) would mean that for every 100 watts the machine uses to move energy, 300 watts are actually moved. As for the above ground thing, it definitely used to be that above ground ones really struggled to work at all when it was below freezing outside, but that was decades ago. Since then we have discovered tricks such as running it in reverse (like you would for air conditioning) to quickly melt any ice accumulation and thereafter keep working, as well as other tricks. They now work reliably even well below freezing, though with slightly reduced heating capacity. That said, putting them underground or underwater is still better for places where it is perpetually cold.

Most heat pump systems do have resistive electric backups in case of emergencies as well, if it really is so cold outside that the heat pump cannot work sufficiently.

As an addendum, most actual scientists would refrain from calling it '300% efficiency' or whatever since naturally we cannot actually create energy from nothing. A heat pump simply steals the extra energy from the outside air (or ground/water). However, I don't think it's misleading to say that in the context of your own home - you actually do get multiple times more out than you put in.