Like Ingrid said, it's an increase, so you're making a stitch. For example Grandma's favourite dishcloth seen here
uses YO on the edges. This is knit by beginning with 4 stitches and adding stitches by doing YO. They create the holes on the edges. Then you decrease to create a diamond. It will be easier to understand once you try it out!
If you need any help with a specific pattern, we're all here to help.