Microservices are one architecture among many that you can employ to build software at scale. Its decentralized approach lends itself well to scale as the needs of your business grow. In this context, scalability doesn't refer to just handling more workload but also, and perhaps more importantly, to the codebase and the engineering organization.
When people think of scalability, they most often think about it as the ability to handle more workload. As the number of users increase, and as their use of the app increases, the system needs to handle more workload.
A software system can be scaled vertically or horizontally. Vertical scaling is the strategy of increasing the capacity of the underlying hardware: more CPU cores, faster CPUs, more memory, faster disks. This strategy is inherently capped by the current hardware technology and is rather costly because high-end hardware tends to be quite expensive.
Horizontal scaling is the strategy of distributing the workload among multiple replicas running on cheap hardware. Scalability is achieved by assigning each of the replicas a sliver of the total workload. Horizontal scaling is practically unlimited when the app is run in the cloud. It is also more cost efficient than vertical scaling.