It’s a service like Netflix that allows you to access hundreds of games on Xbox One, Xbox Series and/or PC with Windows 10, for a monthly or annual paid subscription.
The games can be either downloaded to the hard drive or”streamed”i.e. only the image of the live game is sent to your console. For this second solution, you need a very good Internet connection, to see the action in a smooth and sharp way.
Some games can only be “streamed”.