Inside the egg shell, there is a membrane around the developing chick. There is an air cell between the membrane and the shell, which the chick must break into to begin to breathe air. After the 'internal pip' of that membrane, then the chick has to peck a hole into the shell to get outside air. The membrane is all around the chick, and the chick must break through it to get out of the whole eggshell.
When humidity drops too low during hatching, the inner membrane dries out, instead of remaining soft, flexible and tearable. A dried membrane can constrict the hatchling so it cannot get out. That's "shrink wrapping" the chick.
For those who intervene when this happens, the shell is carefully broken away in small chips, to expose the dried membrane, which is then re-wetted to allow it to become flexible again. Sometimes that dried membrane needs to be cut - oh! so carefully!! - to free the chick. Or it dies.