Every time a company raises money by selling new shares — through a SAFE, a priced funding round, or a new employee stock option grant — the total number of shares outstanding goes up. Since each existing shareholder still owns the same number of shares as before, but the total pie has more slices, their percentage ownership goes down. That's dilution.
Dilution isn't inherently bad: a smaller slice of a much bigger pie is usually a good trade for founders and early investors. The problem is uncontrolled or poorly understood dilution — stacking SAFEs at low caps, oversized option pools, or down rounds — which can leave founders with far less of the company than they expected by the time it's acquired or goes public.
Founders typically track a "cap table" that shows exactly who owns what percentage after every round, so dilution from each new raise can be modeled and negotiated before it happens, not discovered afterward.