The Source Record is where the data is moving from. This record will typically be inactivated or deleted after the merge is complete.

The Target Record is where all of the data from both records will be housed. It is the record where the data is being moved to. This is also the record whose Lookup ID will be kept.

For more details on managing duplicate records in Altru, please see the following Knowledgebase Solutions:
How to merge more than one duplicate constituent record at a time (includes video demo)
Merging Two Constituents