Packaging is the stage at which other elements are added to the project. Elements include a director, actors, and other potential attachments. This may occur late in the development stage, after everyone is happy with the script or film concept and feels it will serve to attract the appropriate people. It might also happen fairly early on. If your agent also represents Julia Roberts, for example, he may get her interested in playing your lead so he can shop both the script and her out as a package, greatly increasing your chances of a sale.
The challenge of packaging is the compromise that often comes with it. The role your agent wants Julia Roberts to play might be written for a man. Or perhaps your story is set in Chicago, but the famous director your agent represents lives in Vermont and won't film anywhere but New England.
When it comes to development, the bottom line is this: no matter how good your script is to start with, it will undergo changes throughout the process for reasons that may have nothing to do with the material. Successful filmmakers learn to use the system to make their movies better.