Substalling basically involves getting one of your subs into a sea zone with enemy units. Since those enemy units will start their turn in a hostile sea zone, they will have to either fight the sub(s) or move away. Also, since transports can’t load in a hostile sea zone, it keeps them from loading for another round. This has the effect of slowing your enemy’s progress both by delaying transport loading and by keeping all of their units from taking advantage of extended naval base movement (which must be done in noncombat movement).
Since subs may submerge at the beginning of a combat round, attacking subs can simply move into a hostile sea zone and immediately submerge without risk of being destroyed. This is known as risk-free submerging, which makes substalling that much easier.
Substalling tends to benefit whichever side is on the defensive. This means that it benefits the Allies more in the early game and Japan more in the mid- to late game.