What is CTCSS and DCS?

CTCSS: Continuous Tone Controlled Squelch System

Basically what it does is this: it adds a tone into your transmission at a certain frequency. Other radios must have the same CTCSS tone or code set to hear the transmission. It will also be heard if the radio has CTCSS and DCS off. 

Different CTCSS codes have different frequencies, and this is how it filters out other people - as long as they have a different CTCSS, or no CTCSS, then your radio will not pass any audio to the speaker. A radio with CTCSS enabled will only pass audio for the tone it has set.

DCS: Digitally Controlled Squelch

It stands for Digitally Coded Squelch. It sends a number repeatedly encoded in digital as you speak, in the low frequencies so you do not hear it. If someone else transmits on the channel with a different or no DCS, the radio will not unmute. If they transmit with the same DCS as you, then your radio will unmute. DCS is newer than CTCSS, and has more codes. This gives a lower chance of picking the same code as someone else. 

Retevis calls both of these features "Privacy Codes".
Privacy Codes are not extra channels -- rather they are a means for sharing a channel with other people without any annoying interference or cross talk. Even though there may be other people using the channel, you will only hear transmissions from those people who are using the same Privacy Code as you.