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I have a general idea but can someone explain exactly what it is.

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Here's the simple explanation...

It's where "Joe Jerkoff" signs up to get paid to send traffic to a website, where they signup (or convert). Joe sends the traffic, they signup but the website operators shave the number of signups to screw Joe out of the compensation the website is obligated to pay under the terms of the agreement. Joe has no real way to tell if he's being screwed though, because it is the website that is keeping the tabs.

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This is why a third party tracking software like NATS is a good thing inspire the no shaving confidence in webmasters. It's what I use and most webmasters are confident a NATS program doesn't shave. Though other software has been known to previously have shave functions built in.
(Wow almost thought I was on GFY for a second.)
Oh and on a side note, there is no money in porn, only drugs and anal prolapse.