The key insight behind the Relative Age Effect is that schools and all types of education all over the world have fixed yearly start dates, and which year a kid starts depends on their age measured in years. One year is quite a long time, especially when it comes to the development of children: consider that they start attending primary school at the age of 6. The development difference between somebody 6 years and 1 day old vs 6 years and 364 days old is massive: the latter has been alive for 17% longer and had all that extra time to develop. This means that they are taller, stronger, and smarter: they will most likely do better in school or any areas of life.
Due to the Matthew Effect of compounding advantages, this advantage early on adds up and has a huge effect for success later in life, in a way that is statistically glaringly obvious as the video demonstrates. Children born in different months of the same year will have hugely different outcomes. Fascinating!
This is an excellent video explaining it with good visualizations and lots of sources and references: