$\mathfrak{m}/\mathfrak{m}^2$ is annihilated by $\mathfrak{m}$ because if $x,y\in \mathfrak{m}$ then $xy\in \mathfrak{m}^2$, hence $x\cdot(y+\mathfrak{m}^2)=0+\mathfrak{m}^2$.
Since $\mathfrak{m}/\mathfrak{m}^2$ is an $A$-module on which $\mathfrak{m}$ acts trivially, we can make it an $A/\mathfrak{m}$-module by defining the action $$ \overline{x}\cdot(y+\mathfrak{m}^2)=x\cdot(y+\mathfrak{m}^2)$$ for $\bar{x}\in A/\mathfrak{m}$ and $x\in A$ representing $\bar{x}$.
In order for this action to be well-defined (i.e. be independent of the choice of $x\in A$ representing $\bar{x}\in A/\mathfrak{m}$), it is essential that $\mathfrak{m}$ act trivially on $\mathfrak{m}/\mathfrak{m}^2$. This is why we consider $\mathfrak{m}/\mathfrak{m}^2$ rather than say $\mathfrak{m}/\mathfrak{m}^3$.