Interpolation is the computer-generated motion between two keyframes. Some animators and compositors like to create their own in-betweens, while others like to have the computer do it. Harmony has stop-motion (no interpolation) and motion keyframes (computer-generated interpolation).
With stop-motion keyframes, there is no computer-generated motion between the stop-motion keyframe and the next keyframe. The segment of the function between those keyframes is flat, and the drawing remains still until the playback reaches the next keyframe, then the drawing pops to its new location.
With motion keyframes, Harmony generates the interpolation between the motion keyframe and the next keyframe. This means that a value for each frame between the keyframes is calculated by Harmony to progress from the value of the previous keyframe to the value of the next keyframe.