In more detail
To check 192.0.2.1 a server queries 1.2.0.192. followed by the list's domain, reversing the octets. An answer in 127.0.0.0/8 means the address is listed; no answer (NXDOMAIN) means it is not. Lists differ in policy: some list confirmed spam sources, others whole ranges of dynamic home addresses that should not send mail directly. The exact 127.0.0.x code tells which sub-list matched, and a TXT record at the same name often gives a reason and a removal link.
Why it matters
Being listed explains why legitimate mail sometimes bounces or lands in spam, for example after a compromised machine on your network sent spam, or because of a previous user of the same address. Removal means fixing the cause first and then asking the list operator to delist the address.
Example
RFC 5782 requires every IPv4 list to list 127.0.0.2 as a test entry and never to list 127.0.0.1. Checking the test entry against a list at dnsbl.example:
$ dig +short 2.0.0.127.dnsbl.example
127.0.0.2
The same query for 1.0.0.127.dnsbl.example must return nothing.