That basically makes a string of all the months, like so:
preg_replace is a function that looks for a pattern---called a "regular expression"---and replaces it with something else. In this case, it looks for a month pattern (from that string above) followed by a four-digit number (presumably a year) and then replaces it with the month followed by the right single quote and the last two digits of the year.
echo=0 argument basically just tells
wp_get_archives to return its string instead of printing it; that way we can use it in