Something that's done manually is done by hand, rather than by machine. If the recycling you leave by the curb is sorted manually, people divide it by hand into metal, plastic, glass, and paper.
When you dig a hole manually, you use a shovel and the strength of your own arms and back. The opposite of this is when something's done automatically, by machine or some automated system. The adverb manually comes from the adjective manual, or "done with the hands," from the Latin root word manus, which means "hand, strength, or power over."