Wipe is when the data tables are purged and so we all start over with no characters, no cars, no bases, no piles of items etc. It is the total restart of a new season of the game where all players start over from scratch. Such is only needed when there are new enhancements that are too non-compliant with existing data (and data structures) to attempt a typical update which would force-fit things together that the devs can clearly see won't fit well.
Here is an example: back in 2238 we did not have helmets, but the devs were working on adding a helmet slot (and thus helmet items) to the game. This also required re-working how eye/head shot mechanics work with certain perks (i think). This was the kind of enhancement that requires a wipe because the way it was did not combine well with the way it would be, and thus a new season of 2238 began. Quick! Build a tent! lol
The alternative to this is a conversion, where the devs have to labor even harder to somehow invent conversion scripts so that existing data can be re-organized for compatibility with new enhancements. Devs are already too busy as it is - this would take too much time and work, so the easy way is to "wipe" it all out, and everyone starts over from scratch, "even Steven".
I hate wipes. All the work we do building up everything gets erased. Argh. In theory, a game project like this suffers fewer wipes over time as the game gets refined and improved. I'm hoping we don't ever see a wipe in Reloaded since 5 more years of new maps and quests could be added to flesh out the already-awesome game we have now.