Isolationism is basically limiting the contacts with other people. It’s like surrounding yourself in a bubble and avoiding contacts with other people by staying inside your house.
It affected China for a mix of reasons
It helped because: The Chinese were able to focus on developing and improving the infrastructure of the dynasty, basically patch up holes in the rule. In that case, isolationism allowed China to defend themselves against the nomadic invaders that, constantly throughout history, have been knocking on their doors (or walls).
It hurt because: Zheng He was making such great advances in exploration. In fact, he was exploring the same time that the Europeans began their exploration. Because of this, Zheng He could have beat the Europeans in the race to find new, resourceful lands. HOWEVER, since the Chinese government wanted to focus on domestic improvements, he was called back. The Europeans were able to explore all they want with no contesting, allowing the Europeans to become huge powers over the next centuries. It is really a huge coincidence that the Chinese recalled him before he was able to discover something great.