An optical waveguide is a physical structure that guides electromagnetic waves in the optical spectrum. In smart glasses, it allows for heavy/bulky projectors to be hidden in the frame temples, while the image is "guided" through the lens to your eye. This enables a slim, normal-looking form factor.
Unlike "Birdbath" optics (used in Nreal Air) which are thicker, waveguides allow for extremely thin lenses (like Vuzix or RayNeo X2). However, they remain expensive to manufacture and often suffer from slightly lower brightness efficiency.