The variable $category is a single category (has to be set somewhere before), and the $category->term_id is the ID of that category.
And, array($category->term_id) is an array with one element only, and that element is category ID. ‘category__in’ argument requires an array of categories, and if you have one category even, it has to be placed in the array.
So, this query will include all posts belonging to a single category, defined by the $category variable.