Wrapping puts an asset into a form a chain can use: Bitcoin represented as an ERC-20 on Ethereum, or ether represented as a wrapped version so it behaves like any other erc-20 token in contracts.
Two very different risk profiles hide under the same word. Wrapping ether on its own chain is a simple contract with no custodian. Wrapping Bitcoin onto another chain involves a custodian or bridge, and therefore counterparty risk.
Example: 1 wrapped BTC should equal 1 BTC, and arbitrage usually keeps it within a few basis points. If confidence in the custodian breaks, it can trade at 0.95 or worse, and no amount of Bitcoin price strength repairs that gap.
Related: bridge, bridge-hack-risk, depeg, erc-20