<type name="Magento\Framework\Webapi\ServiceOutputProcessor">
    <arguments>
        <argument name="dataObjectProcessor" xsi:type="object">
            Magento\Framework\Reflection\DataObjectProcessorPermissionChecked
        </argument>
    </arguments>
</type>

This is a type configuration.

This configuration is for the webapi_rest area. This is the area that corresponds with the REST Api sub-application.

This configuration tells the Object Manager that when a user wants a Magento\Framework\Webapi\ServiceOutputProcessor object that the following arguments should be used in the foo object's constructor.

• $dataObjectProcessor = new Magento\Framework\Reflection\DataObjectProcessorPermissionChecked (...)