I believe that means the markdown formatting gets rendered in the editor while still showing the markdown code…
So an h1 heading is rendered as a heading, but still displays as “# Heading”
That’s said, Bear is going full WYSIWYM with their new editor:
I prefer this approach myself, and think obsidians approach will be perfect- three modes: plaintext, preview and WYSIWYM. I’ve seen the devs say that is the plan