The easiest way to give an answer is to rely on examples. Let us say you measure all the economic transactions in China for the year, as priced in Chinese currency (Yuan). This is what the Chinese government does in issuing its own GDP report. The number is X Yuan. So you look at the current exchange rates, and find that X Yuan equals 5 Trillion US dollars. So China's nominal GDP is $5 trillion. That reflects the price tags of things sold in China. To an American, $5 trillion doesn't seem like much (so to speak).
But then you drill down and look at the actual prices of goods and services in China. You find a haircut is only $1 (in Chinese currency, checking the exchange rate.) Things seem cheap -- at least the many things based on Chinese labor. Maid service, the local noodle shop, dry cleaning ... stuff is real cheap -- mostly because people are only paid, say, $1 and hour, and that low value of labor permeates throughout the whole economy. (The only things that seem expensive are imports).
So it occurs to you that, the nominal GDP that has been reported does not really capture the real quantity of economic activity. In China, $5 trillion means a lot more haircuts given, a lot more noodles eaten, a lot more maids cleaning house, than would be the case in the U.S. So applying PPP to the whole GDP number is an attempt to give a more meaningful measure of "REAL" economic activity occurring.
But such differences are not the same in other countries. Things in Canada and Italy are NOT cheaper than in the U.S. -- just the opposite. You may even have to correct their nominal GDP's downward, in comparing with the US, to reflect LESS economic activity that the numbers would otherwise suggest.
Personally -- I think PPP is more properly use on a per capita basis only -- accounting for real costs and real incomes to tell you something about the average person's relative cost of living. I think it's misleading to do as I say above ... take China's nominal GDP and increase it to say China has a PPP GDP of $10 trillion. It remains a fact that the world values China's GDP at only $5 trillion -- it doesn't matter how many haircuts that buys in China, because the rest of the world does not live in China. Personally I completely discard "GDP on a PPP basis", not useful info.