Let's say Anna and Bob share an "Apartment" group on Splitwise, and also have various non-group expenses. Right now, Anna owes Bob $10 in total: she owes Bob $30 for "Apartment", and Bob owes her $20 for non-group expenses.
Now Anna pays Bob $10 to settle up, by making a payment in the "Apartment" group. After that payment goes through, their total balance is $0, but technically Anna still owes Bob $20 for "Apartment", and Bob still owes her $20 for non-group stuff. Splitwise assumes that Anna and Bob probably want to settle all of those balances, and so it adds two "Settle all balances" transactions in the group and outside of the group, which adjusts things so that they are 100% settled up everywhere on Splitwise.
We know that these types of transactions are one of the most confusing things about Splitwise, and we're definitely working on improvements to make them clearer in the future. For now, we apologize for any trouble! If you still have questions, you're more than welcome to email us at firstname.lastname@example.org and we'll get back to you ASAP.