When you provide liquidity to a pool (for example ETH/USDC) on a decentralized exchange, the protocol automatically rebalances your position every time the relative price of the assets changes. That rebalancing is what causes impermanent loss.
Why it happens
The pool always keeps the same value in both assets (according to the automated market maker formula, usually x·y=k). If the price of one asset rises a lot relative to the other, the pool automatically sells part of the rising asset to buy the one that isn't rising, leaving you with less exposure to the upside than you would have had by simply holding the tokens in your wallet.
Is it really "impermanent"?
It only becomes a permanent loss if you withdraw liquidity while the prices are out of balance. If prices return to their initial ratio before you withdraw, the loss disappears. Even so, you should always compare it against the trading fees earned from providing liquidity, which may (or may not) offset that loss.