Terastal is a special ability that can be activated during a battle, similar to Mega Evolution. When you activate it, your Pokemon will be terastallised for the remainder of that battle. You can only terastallise one Pokemon per battle.
The principal effect of terastallising is that it changes your Pokemon's type to its Tera Type. Your Pokemon's Tera Type is a trait that it carries, similar to its nature or ability. It is possible to change your Pokemon's Tera Type using a currency called Tera Shards. Any Pokemon may have any type as its Tera Type.
For example, if I have a Salamence whose Tera Type is Steel, it will change from a Dragon/Flying-type to a pure Steel-type when it terastallises. Defensively, Salamence will now behave like any other Steel-type; it will be weak to Fire, immune to Poison, etc. If Salamence's Tera Type were Dragon instead, then it would transform to a pure Dragon-type (thereby losing its Flying type, and therefore its immunity to Ground, etc).
Terastal is a bit different offensively. It has some effects that go against the present intuition of how Pokemon types work. Hopefully, this list is digestible:
- If your Pokemon's Tera Type matches one of its current type/s, then its STAB boost for that type will become 2× instead of 1.5×. If it has a second type, then that type will keep its 1.5× STAB boost, even though it was "removed" by Terastal.
- For example, Salamence with "Tera Dragon" will get a 2× STAB boost for Dragon attacks and a 1.5× STAB boost for Flying attacks.
- Shelgon with "Tera Dragon" will get a 2× STAB boost on Dragon. It doesn't have a second type, so that's all.
- If your Pokemon's Tera Type doesn't match one of its current type/s, then it will get a 1.5× STAB boost for that type in addition to the 1.5× STAB boost on its original type/s. This happens even though Terastal would "remove" its original type/s in this case.
- For example, Salamence with "Tera Dark" will get a 1.5× STAB boost for Dragon, Flying and Dark attacks. As above, it will still behave like a Dark-type defensively.
- Shelgon with "Tera Dark" will get a 1.5× STAB boost for Dragon and Dark attacks. It would behave like a Dark-type defensively.
A concise way of putting it is: "Terastal adds 0.5 to the STAB multiplier of the Pokemon's Tera Type, and changes its defensive type to match the Tera Type."
Tera Blast's type follows your Pokemon's Tera Type after terastallising, and is Normal-type otherwise.
Source (includes a longer discussion of Terastal mechanics, including what happens to Adaptability, what order boosts apply, and more)