For decades search engines treated content as a bag of words. They counted keywords, weighted them, and matched them to user queries. That model is largely dead.
Modern search and AI engines think in entities. An entity is a discrete thing: a person, a place, a business, a product, a concept. They build a vast knowledge graph of entities and how they relate to each other. When you search or ask a question, the engine identifies the entities involved and matches them to the entities it knows about across the web.
Entity SEO is the practice of making your business, your services, and your content easy to identify as the right entities, with the right relationships, in this knowledge graph.