Plain English Meaning
Damp air is lighter than dry air. The more moisture in the air, the thinner it acts, so the engine produces less power, the propeller bites less air, and the wings generate less lift. On a humid day, the aircraft does not perform as well as it would on a dry day at the same temperature and pressure.
Full Definition
The principle that water vapor in the air reduces air density because water vapor molecules weigh less than the dry air molecules (nitrogen and oxygen) they displace. As humidity rises at a given pressure and temperature, the air becomes less dense, which decreases engine power output, propeller efficiency, and lift produced by the wings, resulting in degraded .