A work calendar exception is a way to mark out a chunk of time as an exception to what is defined as the rule. You can create Working exceptions or Non working exceptions. These can be defined for a Work Calendar or for a User.

For example, a user is on vacation for 2 days (Monday/Tuesday). His/her regular work calendar considers Mon/Tue as "working". So you have to create a "work calendar exception" for that user and mark his/her Mon/Tue as "non-working".
Or you use a work calendar exception to mark a regular "non working" time as "working". For e.g., One of your users works on every Saturday. You will define a work calendar exception for that user to mark his/her Saturday as "working".
Similarly, 25th Dec which say happens to fall on a Monday is to be flagged as a Company Holiday. So you have to define a "work calendar exception" to mark this day as a "non-working" day for the Work Calendars applicable.

Celoxis schedules tasks after factoring work calendar exceptions.

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