Pending limit orders from institutions are never found at exactly the same price levels, but instead, tend to be found in clusters. These clusters of pending orders can be grouped together to create a zone. Typically, zones tend to occur at historic swing points seen on a chart or at areas where there was previously a pause in a price move. In practice, these are areas where institutional order flow has taken place, but either not all sell orders (supply) or not all buy orders (demand) have yet been filled.
A supply zone is a group of pending sell limit orders above the price that will create resistance when the price hits that level. The resistance occurs as these limit orders are filled, rather than forcing buyers to transact at a higher price. In a similar way, demand is just a group of pending buy limit orders below the price that will create apparent support when the price hits that level.