An air-gapped wallet is a device that has no network connection at all, ever. It signs transactions offline and transfers the signature using QR codes or an SD card.
You build an unsigned transaction on an online device, scan it into the air-gapped wallet with a camera, sign it, and scan the signed transaction back out to broadcast it.
With no network, Bluetooth, USB data or radio, there is no channel for remote attackers to reach the wallet. The attack surface is drastically reduced.
Air-gapped signing is slower and more manual than a connected wallet, and it requires careful handling of the QR transfer process.
Air-gapping is popular with long-term holders and Bitcoin-focused users who value maximum isolation. For most people, a standard hardware wallet is already very secure.