Cross-site is another way of saying third-party or other-site. Let's say you are on example.com, and it sets some cookies. Those are first party or same-site cookies. Imagine there is content in the page from trackingservice.com and amazon.com. The Tracking Service and Amazon content will each come along with their own cookies. Those are cross-site cookies because they do not belong to example.com.
In Firefox, the block on Cross-site tracking cookies is based on a list of servers known to be tracking servers. If a cross-site cookie isn't from one of the listed servers, then it is allowed. This minimizes website breakage. So in the earlier example, the cookies from trackingservice.com most likely will be ignored by Firefox.
Isolating cross-site cookies prevents sites from following your habits across different sites. In the Amazon example, the Amazon cookie set on example.com won't match up with the Amazon cookie set on other sites, so you won't get personal recommendations from your regular Amazon shopping while visiting example.com, and you won't get recommendations based on your visit to example.com when interacting with Amazon content on other sites. Unfortunately, this sometimes breaks websites that use multiple servers; oddly, it seems to affect numerous banking sites. So you may need to make exceptions for those sites. See: https://support.mozilla.org/kb/total-cookie-protection-and-website-breakage-faq
