When you loosen something, you make it less tight. A ballerina, for example, might loosen her tightly coiled hair after dance practice.
You might need to loosen your belt after eating a huge meal, or loosen your collar and tie after a long day at work. Things sometimes also loosen on their own, like when a dog's collar loosens gradually until she can slip right out of it to chase a squirrel. There is also a figurative way to loosen things, making them less strict, like when a community loosens certain rules or laws.