In the case of images, it means to estimate an intermediate value between the neighbors of a given point. For example, in the case of bilinear interpolation (the default of MATLAB's interp2 routines), the 2x2 group of pixels around a point are averaged, e.g.
>> Image=[1 2; 3 4];
>> interp2(Image,1.5,1.5)
ans =
2.5000
