When they say they are using a 128 bit AES key, they mean the length of the key is 128 bits. Technically a 128 bit AES key could have 0 bits of entropy, 128 bits of entropy, or anywhere in between.

To be secure, however, the 128 bit key should also have high entropy. Ideally, a 128 bit AES key would also have 128 bits of entropy.

A few side notes
Keep in mind that $\log_2N^L$ only computes the entropy in the key if the $L$ characters in the password were chosen randomly.

There is no such thing as a 160 bit AES key. AES supports key lengths of 128, 192, 256 bits. 

Is AES key length a size of the key or entropy?
I am looking for a word or phrase regarding something that is "impossible". I can't seem to put my finger on it, but I am trying to think of the word to describe something that is the top of the top, and thus impossible to achieve? 

The only two words I have come up with are elusive and formidable, neither of which really mean what I want them to mean. I want something more clever to put it plainly.
