It writes the output of your command inotifywaitand analyzes it line by line, assigning each line fin the instruction while.
This special command inotifywaitcontinuously monitors the directory /tmp/watchand displays the fully qualified path name at creation.
The loop while, in turn, processes each of these file names and creates a symbolic link in the directory in it /tmp/other/.
script, while read:
pax$ ( echo 1 ; echo 2 ; echo 3 4 ) | while read f
pax> do
pax> echo "[$f]"
pax> done
[1]
[2]
[3 4]