To hollow out is to scoop or otherwise remove the insides of something. To build a cave, you'll have to hollow out the earth in the side of a hill.
During war, soldiers sometimes hollow out trenches they can crouch in for protection from gunfire. Animals, including woodpeckers and several types of insects, also hollow out protective areas for themselves, often from dead wood in trees. And some kinds of drums are also made by hollowing out a piece of wood. Hollow has an Old English root, holh, "hole or hollow place."