I'll try and do my best to explain, but I didn't write that part of the design.

An entity within the engine could be many things. An in-game object for example. But to become those things you attach components to it. So for example, if you want an in-game item, it is an entity that has a mesh component attached to it and a material component. Thus you could have multiple instances of an item, they all look identical, whilst at the same time they have their own properties such as location and orientation.

That's about the best I can do at the moment in terms of an explanation/clarification. If you need more, hopefully one of the other's will provide it.