A wetbag is a special bag for holding soiled cloth pads while out of the home. It is also a term used for the same/similar bag used for carrying cloth nappies/diapers, which is presumably where the term comes from - a bag to put wet nappies/diapers into.
Unlike the name suggests, you could not fill the bag with water to soak your pads in (you would need a [soakingpot]. However they are usually lined with a waterproof or water-resistant material such as PUL, wool, polyester fleece, or nylon, which helps prevent any blood leaking from the pads onto other items in your bag.
They can be of any size, from small enough for just one pantyliner to large enough for multiple night pads, and can close with a snap, zip, cord, or Hook & Loop tape (eg velcro). They can also have outer layers of any other fabric for visual appeal.
Some wet bags have multiple compartments to hold more than one pad at once. Some may include a waterproofed and non-waterproofed side for carrying both fresh and soiled pads.
A wetbag is not a requirement for using cloth pads. A PVC pencil case or makeup bag, or even a snap seal ("ziplock") bag would work as a substitute.