It creates a new security group for use with your account. A Security group is just like a firewall, it controls the traffic in and out of your instance. In AWS terms, the inbound and outbound traffic. The command mentioned is pretty straight forward, it says create security group, and does the same. Moving along, once your security group is created, you can add different rules in it. For example, you have an RDS instance, to access it, you have to add the public IP address of the machine from which you want access the instance in its security group.