The transcript explains race conditions in web applications where multiple users modify the same database records simultaneously. It illustrates with an example of two users incrementing a counter. Both fetch the initial value, such as 0, add one, and write back, but this results in the counter only increasing by one due to overwriting. This leads to data inconsistencies. The discussion stresses writing code to prevent such issues, shown through an endpoint that retrieves a record, increments it, and updates the database.