What does this mean in Disk Utility?

It's macOS's attempt at describing the fact Apple File System stores files in a manner that records only changes to them. Those changes result in "holes" or gaps in a file's structure that can be filled in with new data as they are stored.

The "tidemarks" could also be described or thought of as "high water marks" that denote how large those files (with all their changes) may grow to occupy the space allocated by the storage device.

AFS is a proprietary system that Apple discusses in only the most cursory detail: Apple Developer Documentation. Attempting to describe how it works using terminology applicable to traditional file storage systems is elusive.

Apple might be better off just omitting that piece of information from Disk Utility. Of course that would only result in people complaining that Apple isn't being transparent or forthcoming with how macOS uses the storage they paid for. It's a losing proposition.

Hi barneyhairball,

Does the issue continue if you erase and reformat the drive again? If needed, the steps to do that are below:

"If you have any files you want to save, copy them to another storage device.Open the Disk Utility app  on your Mac using one of the following methods, depending on the type of disk or volume you want to erase:If you want to erase your startup disk: Start up your computer in macOS Recovery, then choose Disk Utility in the Recovery app. To learn how to start up your computer in macOS Recovery, see Intro to macOS Recovery.Note: If you want to get your Mac ready to trade in, sell, or give away, and your computer is a Mac with Apple silicon or an Intel-based Mac with an Apple T2 Security Chip, use Erase Assistant.If you want to erase any other type of storage device: Double-click Disk Utility in the /Applications/Utilities folder.3. Choose View > Show All Devices4. In the sidebar, select the storage device you want to erase, then click the Erase button.5. Click the Scheme pop-up menu, then choose GUID Partition Map.

If the Scheme pop-up menu isn’t available, make sure you selected the storage device you want to erase—it’s at the top of the hierarchy.

6. Click the Format pop-up menu, then choose a file system format.7. Enter a name.8. (Optional) If available, click Security Options, use the slider to choose how many times to write over the erased data, then click OK.

Secure erase options are available only for some types of storage devices. If the Security Options button is not available, Disk Utility cannot perform a secure erase on the storage device.

9. Click Erase, then click Done."

Those steps are from this article: Erase and reformat a storage device in Disk Utility on Mac - Apple Support

If the issue continues, please answer the questions below as it can help us understand this issue better:

Did you see this right after reformatting the external drive?Can you tell us the file system format you chose when reformatting the external drive?

Take care!

The comments regarding "snapshot tidemarks" is merely informative, completely unrelated to formatting, and there is no need to do anything that you have not already done.

Just use it.