(This is my understanding of it, but I could be wrong.) It means that Lemmygrad is explicitly refusing all interactions (cross-posts, upvotes, downvotes, etc.) from those instances. Depending on the settings of the individual instance (lemmygrad.ml in this case), either only the explicitly “linked” instances are allowed to interact with lemmygrad.ml, or any instance that isn’t “blocked” is allowed to do so. So lemmygrad.ml is linked to lemmy.ml, mander.xyz, feddit.de, and many others, which means that it allows interaction from at least those instances (and possibly also from instances not on the “blocked” list), but not from the various instances listed on the “blocked” list

As for why they’re blocked: I just had a look at wolfballs.com and it seems to be run by right-wing “trans women are not women” types