Unsettled funds are money in your trading account that hasn't finished its settlement cycle yet — most often the proceeds from selling delivery shares. You can use 100% of them to place new trades immediately, but you can't withdraw them to your bank until they settle, which takes T+1 working days for equity and F&O.
Why can I trade with them but not withdraw them?
The exchange only transfers sale proceeds to your account after settlement completes (T+1). Until then the money is real and usable for trading, but it isn't yet withdrawable — which is why your balance available to trade can be higher than your withdrawable balance. See Why does my withdrawable balance not match the balance available to trade? and, for the balance terms themselves, What do ledger, withdrawable and margin balances mean?
When do they become withdrawable?
Once the settlement cycle completes — T+1 working days after the sale, counting only working settlement days. For the exact timing after a sell, see When can I withdraw my funds after selling shares?