Withholdings mean a certain portion of employee paycheck that is held off by the employer. Withholdings are primarily used for deducting agreed amounts out of employee paychecks.
Withholdings can be initially created in Lists > Payroll > Withholdings. Check Core Help for details.
After you have created withholdings, you can assign them to the employees, contract employees or outside consultants. You can assign these withholdings via Employee > Payroll > Withholdings.