Your source is talking about unifying language in project groups, their own terminology forming the group. The example is specific to the project in Soul of a New Machine, Tracy Kidder's account of the design of the new computer, and it doesn't make sense on its own from the context: you have to read the other parts of the book to understand it. Wikipedia.
It's not a general idiom that would be understood out of context. (Related idioms would be "Painting stripes on a horse doesn't make a zebra" or "Put lipstick on a pig." (US)
It means literally a bag, such as a brown paper bag for groceries, but it's specific to these historic events. It's used as an arbitrary inappropriate and inelegant object stuck on the side of something -- it doesn't make it into a new thing, it's just the old thing with something stuck to it. It becomes the metaphor for the project. Eclipse, NOVA, EGO and Victor are the names of projects.
This sentence makes that clear:
Not everyone associated with the Eclipse Group liked the looks of this proposed new machine. They thought it would be just a refinement of the Eclipse, which was itself a refinement of the NOVA. “A wart on a wart on a wart,” one engineer said. “A bag on the side of the Eclipse.”
Kidder takes it as a shorthand for the point of view, as used by those at the time.
Convinced that Eagle would be a wart, a bag, a kludge—and suspicious that it would go the way of EGO and Victor—some of the brightest hardware engineers around expressed no interest in joining the project.
Ferns in pots hung from the ceiling. Stuck with pins to the walls were cartoons, T-shirts, posters, postcards and, over by the doorway, a brown paper bag—a joke, the figurative bag on the side of Eclipse given material shape.