When a transmission goes in for a rebuild it means that all the old parts are removed from the transmission and replaced with new parts.
Rebuilding an automatic transmission is a complicated process if you've never done it before.
There are lots of small parts that have to go back together just right and in the right places or the transmission will not work once you get it back together.
I always send transmissions off to another shop to have them rebuilt because although I'm a mechanic and can do engine rebuilds and other work on a vehicle the automatic transmission is just way too complicated for me.
I once tried to rebuild an automatic transmission and I failed so I always have another shop do the transmission rebuild.
I do rebuild engines though and that's not as complicated.
All the mechanical parts, bands etc are removed from the automatic transmission and then replaced with new.
So essentially when you have an automatic transmission rebuilt you're getting sorta a new transmission at least on the inside of the transmission.