It hands administrative control of a contract to a different address.
Many contracts have an owner who can call privileged functions — pausing transfers, changing fees, minting tokens, withdrawing balances. transferOwnership moves that power to another address.
What the owner can actually do varies entirely by contract. In some it is trivial. In others the owner can mint unlimited supply, block your transfers, or drain the contract.
renounceOwnership is the related call that gives up ownership permanently, with no way back. It is sometimes used to prove a project cannot rug its own token — and sometimes used to make a contract permanently unfixable.
If you are signing either of these without being the project’s administrator, stop.
Check a transaction of your ownPaste anything. It is decoded in your browser.