https://en.wikipedia.org/wiki/Theory_of_mind

I imagine you probably thought your daughter's psychiatrist was referring to some scientific theory. But theory of mind (not "mind theory", although the confusion is understandable if you thought it was a scientific theory) refers to the ability to understand other people (mainly, though potentially animals too) as also having thoughts, intentions, feelings and so forth. Not just in a general "this is a person who thinks and feel things"-kinda way, but also specifically to infer what another person might currently be thinking or feeling. Not like mind-reading, of course - the idea isn't that you can literally know another person's thoughts. But most of us, in our daily interactions with others, are constantly trying to guess what motivates the actions of other people, what type of mental state they are in, and so forth, and this helps tremendously in order to make those interactions successful.

People with autism seem to commonly have deficits in theory of mind - that is, they have trouble figuring out another person's mental state or intentions. However, as with all neurodivergences, every person is different, and also recently some research has come out that challenges this idea. This newer research has found evidence that the apparent theory of mind deficits are reduced when people with autism interact with each other rather than with neurotypical people (and, conversely, that neurotypical individuals appear to have similar theory of mind problems when trying to understand people with autism). So, perhaps it's not that people with autism have trouble understanding the psychology of others in general, but rather that they (and people in general) find it difficult to infer the mental states of people who don't think like them. Or at least, that may be part of the explanation - there may still be genuine theory of mind deficits at play (in some individuals) as well.