Economists usually explain "increasing returns to scale" by indivisibility. That is, some methods of production can only work on a large scale -- either because they require large-scale machinery, or because (getting back to Adam Smith, here) they require a great deal of division of labor. Since these large-scale methods cannot be divided up to produce small amounts of output, it is necessary to use less productive methods to produce the smaller amounts. Thus, costs increase less than in proportion to output -- and average costs decline as output increases.
Increasing Returns to Scale is also known as "economies of scale" and as "decreasing costs." All three phrases mean exactly the same.
