When you are developing a React Native application you will most likely be writing a lot of JavaScript code that contains dependencies that usually come from external repositories like NPM. The compilation of these many JavaScript files and dependencies will be processed into a single bundle file that can be read by React Native. In React Native this compilation will be done by default by Metro Bundler.
So basically Metro Bundler works by taking your source code, all external library dependencies as well as static assets that you use and converting them, optimizing them, and packaging them into a single bundle that can be run by React Native.