Said, obviously, of clothing or fabric. The idea behind this is that if you get a tear in your best trousers, by repairing the hole when it is small, it can be fixed with little effort, while if you procrastinate the hole will enlarge, required more stitches and thread to mend.
A longer-winded expigated version would be "If you fix a problem now when it is small it will not take much to fix. But if you wait, the problem will get more out of hand and require more work to repair."