Withholding tax is a tax that is withheld directly at source before the recipient receives the payment. In the case of dividends or interest, the tax is withheld by the paying company and paid to the tax authority. This ensures that the tax obligation is met before the recipient receives the income.
An example of withholding tax is a company's dividend payment to its shareholders. If a German company pays dividends to a shareholder in another country, the company may withhold a withholding tax and pay it to the German tax authority. The shareholder then receives the dividend minus the withheld tax. You can find more information about withholding tax here.