This will provide separate outside platforms for NB and SB trains, and a tunnel to connect them, so that passengers will no longer have to cross active tracks to reach NB trains.
This should allow ACE and Capitol Corridor trains to make stops at Santa Clara, which they current pass by.
This project was long held up by the belief that it could be rolled into the construction of the Santa Clara BART station, but fortunately enough reality seems to have set in to get this small project rolling now, rather than waiting another decade or two.
Ideally, the new tunnel could provide a way to get between the station and the area to the NE of the tracks, which currently can only be done by taking a roundabout, mile-or-so-long walk to use an overpass, or trespassing (which CalTrain strenuously insists you should never do, but not to the extent of putting up a fence).
If they provided access to that side, the VTA's #10 Airport Shuttle bus could loop over there instead of at the front of the station, and probably save about 10 minutes each way, too.
Here's a Google Maps Satellite view of the area, if you're curious.