What is Meant by "Felting"?

I’ve been browsing through patterns and have noticed several (especially bags) that call for the finished item to be “felted” at the end. One pattern described how to go about doing this, but I was just wondering why some items are felted and what the difference in the end result is between a felted item vs a non-felted item?

When you felt, it shrinks up the piece and makes the sts tighter and the whole piece is stiffer. So for a bag you wouldn’t need to line it to prevent things from poking through the sts. You can only felt wool yarn, not acrylic or cotton.

Thank You! That helps explain things!