Pictures can help here - so let's look at DC offset .....
Waveform B is your typical AC that everyone knows and understands. It swings symmetrically above and below zero volts, crossing that zero level twice in each cycle.
Waveform A is an example of AC that swings between +1V and +3V - and here is where some confusion can arise. It may appear as being a "varying DC" because the voltage never gets near zero volts, let alone go negative - but that is just how it
looks.
When it comes to analysing such a signal and doing math, it is much easier to think of it as having two components: The pure AC part (which in this example is 1V peak or 0.707V RMS) and the amount this has been shifted from the zero volt axis, which is a DC value (which, in this case is +2V ).
What is most significant is that this two component approach
works for practical efforts with circuits and makes life much, much simpler.
Your function generator has this ability to add this "DC offset" - in whatever amount you need - to the AC signal it produces. This allows you to feed it to a circuit that uses an AC signal that does not go below 0V - such as an audio amplifier which is powered by a single, positive supply.