Several LinkStation types (e.g. the LS1) contain an Atmel AVR microcontroller, responsible for controlling the front-panel LEDs, the on-off button, the reset button, the watchdog timer and probably other housekeeping functions of the LS. Other LinkStation types (e.g. the LS2 or the TeraStations HD-HTGL and HS-HTGL (TS)) don't contain an Atmel AVR chip. Instead e.g. a Freescale microcontroller is used for the housekeeping. Still however, people also tend to call this microcontroller AVR, although it is technically wrong.
There is no general agreement about what AVR stands for. Atmel says it is just a name. Other speculations say it stands for Advanced Virtual RISC. Yet others claim the original engineers of the AVR series chips are named Alf Egil Bogen and Vegard Wollan, and AVR is short for AlfVegardRISC.