Valuations are instantaneous. It is, roughly speaking, how much a buyer would have to pay to buy the company right now. That's easy to do with public companies because it is just "trading price * number of shares". Venture-backed companies typically use their last investment round for valuation, where, if they had $100M invested in the company for a 1% stake, you multiply that by 100 to get the $10B valuation.
It is likely an inflated number, but it's hard to tell because it isn't in an open market. It could be $1M or it could be $100B.
Incidentally, "trading price * number of shares" almost always understates the selling price when a public company is bought, and it almost always overstates the selling price when a company is liquidated (technically, shares are worth zero when a company is liquidated, but I mean how the share-price usually free-falls in a very short period right before a firesale). The reason for this is that trading price, by definition, is set by the most marginal buyers and sellers, those who most want to get rid of their shares or most want to acquire new shares. The actual shareholder body consists of a large range of individuals with a large range of selling prices. To acquire a full company, a buyer needs to start convincing less marginal shareholders to sell, and usually needs to pay a premium (sometimes up to 50% over market cap). To get rid of a company that has suddenly started heading for bankruptcy, shareholders need to sell into a market of much less willing buyers, and so they need to offer a significant discount.
It is likely an inflated number, but it's hard to tell because it isn't in an open market. It could be $1M or it could be $100B.