A few fans of the show flocked to the comments section to answer the question, with the consensus being that the term means a drug user, specifically a "pothead." One commenter with the username _dmgz noted that Jackie Burkhart (Mila Kunis) says the term in the first season's 11th episode, titled "Eric's Buddy."
"It's from the episode where Eric makes friends with the popular kid who kisses him. Jackie is trying to explain the complexity of the 'clique jump' Eric is close to accomplishing. Head is short for Pothead," wrote the Reddit user.
During the episode, Eric gets close to his lab partner Buddy (Joseph Gordon Levitt), who secretly has a crush on him. After school, Buddy offers Eric a ride in his Pontiac Firebird Trans Am to the popular restaurant The Hub, where Jackie, Fez (Wilmer Valderrama), and Donna (Laura Prepon) are already eating. Jackie is shocked when she discovers that Eric is with his classmate, as he and Buddy are from different high school circles.
"This is a serious clique breach," asserts the cheerleader.
When Donna mocks her for making that statement, Jackie elaborates, stating, "You see, Buddy is in the rich kid clique. They mingle with the jock clique. Then you have your smokers and your heads, okay? The rich kids can be smokers and jocks can be heads but jocks cannot be smokers unless they're rich."
