To what does "all men are equal" refer?

The phrase "all men are created equal" comes from the second paragraph of the Declaration of Independence.
The phrase itself forms the basis for America's fight against English tyranny. The colonies contend that, because all men are created equal, no monarch should impose his arbitrary will on fellow countrymen an ocean away. The Declaration of Independence asserts that the concept of equality allows the governed to abolish any form of government that has become despotic.
Interestingly, the Declaration argues that equality also provides for representation in the legislature. The document contends that King George III has failed to provide such representation for his British countrymen in the American colonies. The rest of the Declaration of Independence clearly documents the abuses King George is guilty of. For example, he is said to have waged open warfare upon British citizens.
The king is also accused of suspending the court system in the colonies and of imposing various strictures on the people's freedom. In short, King George has acted like a dictator and failed to secure the rights of his people.