The cat command is a very common and useful command in Linux. In simple terms, it's used to display the content of files right in your terminal.
Think of it like quickly "spitting out" the text contained within a file so you can read it immediately.
In this step, when you typed cat /tmp/hello, the cat command took the file located at /tmp/hello and printed its contents (Hi,\nI am Labby!) directly to your terminal screen.
Does that make sense?