IN BATCHES of 1 puts one of the instances found in the context and continues execution with this instance.
The rest depends on what else is in the Context. From Bruce's previous email it seems that he has two instances of the Order object in the Context already. FIND puts an instance of the Quote there. Then he calls a sub-process and the sub-process is executed with every combination of Order/Quote available in the Context (2 in this case - Order1/Quote1, Order2/Quote1).
Then IN BATCHES OF 1 puts another instance of the Quote object in the context, so it has Order1, Order2, Quote2 and the sub-process is run with the combination of Order1/Quote2, Order2/Quote2 and so on.