The term 'clipping' refers to the situation when two units end up engaged in combat and are not facing fully against each other. This looks wrong, as a number of models will be standing facing thin air as their comrades, just a step away, are in the thick of the fighting.
The most common case of Clipping happens when a unit is engaged to the front with two or more enemy units. If after the combat some of these units flee, while others don't, this may leave some models that were previously engaged without opponents to fight.
This may also happen during a charge, if the units are far apart, exactly at the maximum charge distance of the chargers (Fig. 1). This situation will make it impossible for the chargers to wheel, because any wheel would mean that they fail the charge. Therefore they will have to charge directly forward. Funnily enough, a very similar situation can occur when the units are too close and the charging unit cannot physically wheel enough to bring the maximum number of models in combat (Fig. 2).
In all these extreme situations, if you want to play literally by the rules, you have to live with the clipping and continue with the game.
However, you should also feel free to agree with your opponent upon any gentlemanly solution which could avoid clipping situations. The best solution is normally to slide sideways the chargers (or the unti that won the fight), in order to bring more models in to the fight. This is not technically allowed by the letter of the rules, but if both players agree to do this, the game will benefit in realism and fun (you get to roll lots more dice!).
The important thing to understand when you come across this sort of situation is that clipping is not in the spirit of the game and every effort should be made to avoid it. It just looks ugly!