The answer by PhysicsTeacher is right; I will extend it a little.
The motivation is all about whether or not it is correct to say, of a composite physical system, "It is made of A and B", where we can think of A and B as separate parts of the system, each with their own properties. In most of science it is assumed that this is a valid way of speaking. In quantum physics it is not always correct.
The quantum physics equivalent of saying "A and B each have their own properties" is to assert that the joint quantum state is a product, where contributions of A and B appear in the form:
$$
| \mbox{total state} \rangle = |\mbox{state of A}\rangle \otimes |\mbox{state of B}\rangle
$$
(and for brevity we often omit the tensor product operator $\otimes$). In this case any interaction with A, such as scattering particles off it, or hitting it with a hammer, or allowing it to fly through a magnetic field gradient, will influence the state of A but not B (assuming B is not nearby). In particular, we can measure A and thus determine its properties and assert "those are the properties of A".
When converted into density matrix notation, the above state becomes
$$
\rho = | \psi \rangle \langle \psi | = \rho^A \otimes \rho^B .
$$
If we now have a heap of systems like A and B and all of them are in this sort of product state, but we don't know which systems are in which state, then we allow for this by forming the density matrix by adding each one of the above form, multiplied by the probability $p_i$ of that particular one. Thus we get
$$
\rho = \sum_i p_i \, \rho^A_i \otimes \rho^B_i . \;\;\;\;\;\;\;\;\;\;\;\;\;\
(1)
$$
This is the state you asked about, and I have added an interpretation of the $p_i$ (which you called $\lambda_i$).
The next part of the analysis is to say that the subscript $i$ here indicates a choice of decomposition of the total. There are many ways of making the same $\rho$, by adding up different choices of $\rho_i$. This is like saying one matrix can be expressed as the sum of others in many different ways. Among those different ways, some will have the form (1), some will not. In order to say "the state is not a sum of product states" we have to say "there is no way of forming this sum using product states." That is how entangled states are defined.
Now let me say two more things to motivate the definition. First, for an entangled state defined this way, it will not be possible to say "these are the properties of A" and "these are the properties of B". For example, in the spin-spin singlet state,
$$
\frac{1}{\sqrt{2}} \left(
| \uparrow \rangle_A | \downarrow \rangle_B - | \downarrow \rangle_A | \uparrow \rangle_B \right)
$$
it is not possible to say "the spin of A is up" nor "the spin of A is down" nor "the spin of A is in this direction" nor "the spin of A is in that direction". Nor can one say "the spin of A is in a superposition of up and down"---because if it were correct to say that the spin of A is in a superposition of up and down, then there would exist a direction along which the spin of A is pointing, and one could measure along that direction and get the same result every time. But that is not what is observed. So the way to put the situation into words has to be "when A+B are in the singlet state, then A does not, in and of itself, have a spin direction, and nor does B". One can cash this statement out more fully in terms of local hidden variables, the way John Bell famously did. Here I am giving some general comments on what it means to say that two things are in a quantum entangled state.
Finally, I should add a remark about spatial location and the role of spacetime. The standard definition of entanglement is the one you gave and the one I discussed in the above. It mentions only states and Hilbert space and density operators (or matrices).
However, I would like to add that an important added feature, that I would want to look for in order to take an interest in an entangled state, is to ask whether the two entangled subsystems can be physically located in different places, especially spacelike-separated places. If they cannot, then it may be that someone is simply analyzing a given system, such as an electromagnetic field mode, in a way which adopts the language and mathematical tools of entanglement, but does not exhibit the really interesting physical properties of entanglement. The latter are to do with location in spacetime, not just state in Hilbert space.