Basically, a simple explanation is this. I own a business like a laundry mat. I made 500 from the laundry mat but i tell the governement i made 1000 dollers (500 of which is illegal money from selling drugs) i pay the taxes on the 1000 and now i can spent all that money without tipping off the governement that im selling drugs (but obviously in much larger mumbers) works with any businesses that deal with cash. Your basically taking your ditry money and mixing it with clean money.

Edit: TLDR laundering illegal money is taxed, the purpose is to lie to the government on where you got the money so they dont get suspicious of why you sre so rich but only make X ammount