Literally "air in the thorax", or air in the chest (where it shouldn't be)
When air leaks anywhere in the space between your lung and chest wall (normally filled with slippery fluid) it increases the pressure around your lung, and pushes on your lung. This leads to your lung collapsing in on itself, because the pressure required for it to inflate is much smaller than the one keeping it deflated. Usually, you only get a fraction of your lung truly collapsed.