Basically they are re-arranging that connections between all the points and signals.
Setting the route for a train involves a lot of steps. For example, if a train is about to start from a loop line in a station, then the station master should make sure that all the points are set correctly and should also ensure that only the route being taken by the train has a green signal while all other lines have a red signal. For small stations, this is a relatively easy task, but for large stations with many lines this has to be done very carefully. Even for a small station, there is always the risk that the signals can be set...
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incorrectly causing two trains to to have a collision, or a derailment. So, to avoid this, 'Interlocking' is done.
In the most basic form, interlocking ensures that the signals are set according to the way the points are set. For example, consider the same case where a train is about to depart from a loop line in a station. Now if another train is entering the station at the same time on the main line (in the same direction, not in the opposite direction), then because the point is set to the loop line, the main line train can derail or collide with the train leaving from the loop line. So in an 'Interlocked' system, when the SM sets the points for the loop line train to enter the main line, all the signals behind the train on the main line will automatically show red, and other loop line points will automatically be set towards the dead end sidings. This way, the SM has to just set on point, and all the other points and signals will be automatically set.
When new stations, new loop lines or junction lines are opened, the existing interlocking arrangements will have to be modified to allow trains onto the new tracks, so the existing 'Interlocking' is removed and a new interlocking system is put in place to take care of the new lines.