Hi, see that Confused isn't on line so am going to leap in and help.
What this question is asking is that FLIP "becomes" SWIM by creating new words linking the two; changing one letter in each at a time. A sort of stepping stone approach.
In this example, "i" is the only letter in common between SWIM AND FLIP so, one by one, the other letters have to be changed.
It doesn't matter which order you do it in as long as the chain can be made, creating new and valid words each time as your stepping stones. You keep three of the original letters and change one in turn each time - sometimes there are more ways than one.
Here, the F gets dropped in favour of the S (because FWIM, and FLIW aren't words, only FLIP is).
Now you have gone from FLIP to SLIP. You've got your S and so you need now to lose the L and the P, and gain a W and a M.
SWIP isn't a word
SLIM is, so you have gone from FLIP to SLIP to SLIM, (this time swapping the P for a M.)
Now you just have to swap the L for a W to get SWIM from SLIM.
Hope this makes sense.