What does “In use by …” mean in Collab Sync?

Short answer: It means the other Mac has the file open right now. You can still edit it; if both of you change it, Collab Sync keeps both versions so nothing is lost.

It's a heads-up that the other Mac has that file open right now. It doesn't stop you — you can still edit it.

If you both change it, both versions are kept: the newer one wins and the other is saved beside it, so you can choose later.