Wetted surface is just what it sounds like. Every bit of the boat that has contact with water creates friction at speed. At high speed, the friction dominates as the major resistance component. A larger wetted surface means higher friction, which means a higher resistance, leading to higher fuel consumption and less top speed.
On a planing boat, there are two types of wetted areas. The pressure area, which makes the boat lift out of the water, and the spray area, which is undisired and only creates friction.
Petestep hulls remove as much of the spray area as physically possible on a planing boat, thus reducing the wetted surface and frictional resistance to a minimum.