The term refers to the practice of uncoupling the loco (or locos) from one end of a train, switching it onto a parallel side track, driving it ("running around") to the other end of the train and switching it back onto the same track then hooking it up to the other end of the train.
The feature is provided in the Driver Command list as a means of automating this somewhat routine and tedious task so that Trainz does it for you. However, there are issues with the placement of turnouts and switches and the length of the track segments between the switch and the next signal or buffer that have to be carefully considered in the design of the layout.