means that two parties agree to swap something, generally obligations to make specified payment, including either interest payments or currencies.
eg: Company A has stable cash flows, but it has issued a floating-rate bond to its floating-rate bondholders; Company B has cash flows that fluctuate with the economy, while it has issued a fixed-rate bond to its fixed-rate bondholders. It is definitely better for A to make fixed interest payments to B's fixed-rate bondholders and for B to make floating-rate interest payments to A's fixed-rate bondholders. So these two companies swapped their payment, thus a interest rate swap occured.