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Teacup means a dog under 4 lbs and under 7 inches tall. Teacup is a not an official term, it's just a casual term to describe a small dog. No, I definitely do not think that pugs get that small. Also cross breeding a pug with another breed-- like a teacup poodle-- would not result in a teacup pug anyway because the pug mother is still too big. Plus the puppy wouldn't even be a pug, but a mixed breed.
The Teacup Poodle is an unofficial size variation of the Poodle. It is, in reality, a Toy Poodle, but is smaller in size than the AKC Toy Poodle standard. Breeders are purposely breeding them accordingly. Teacups are common in the States. They tend to be 9 inches or smaller, and under 6 pounds in weight.