What do we mean when we say it today?
We hope no one you know actually wants to pull a Shylock and bet you a "pound of flesh." If you do know someone like this, we suggest you run away from them. Seriously, you'll be glad you did.
Today we use this phrase today to mean anything that's a ruthless deal. If someone makes you pay something out of spite or vengeance, then they are asking you to pay the proverbial "pound of flesh."