It's used metaphorically to describe overdoing or excessive enhancement of something already sufficient or perfect. Printing her award on golden paper would be gilding the lily.
Pro Tip 2/3
Negative Nuance
The phrase usually suggests that the excess is somewhat negative or unnecessary. He was already praised by everyone; the speech in his honor gilded the lily.
Pro Tip 3/3
Cautious Usage
Avoid using it to describe situations where improvements or enhancements are genuinely needed. Instead of helping, his extra explanations gilded the lily and caused more confusion.