In a waterfall, networks are ranked by their historical eCPM and called sequentially. The first network willing to pay above its floor serves the ad.
Waterfalls are simple but inefficient: the ordering is based on averages, not on what each network would pay for this specific impression, and sequential calls add latency. That is why the industry moved to in-app bidding. Waterfall lines still exist as fallbacks for non-bidding demand.