What is Relative Permeability ?

The flow of one fluid is restricted by the presence of another fluid through the narrow connected pore spaces of a rock system. The phenomena is quantified by a parameter called "Relative Permeability", which is defined as the ratio of the permeability of fluid X in presence of fluid Y to the permeability of fluid X alone in a rock system. 

Figure-1: When only one fluid is present, it can flow easily with relatively less restrictions. Here the red-colored humanoids are representing oil molecules "running" through the connected pore spaces.

Figure-2: When there is another fluid, the flow of the first fluid is restricted. Here the red humanoids are representing oil molecules, where as the blue humanoids are the water molecules hampering the flow of oil.

Mathematically, for an oil-water system...

k_row = k_effow / k_o

where,

k_row = relative permeability of oil in presence of water
k_effow = effective permeability of oil in presence of water
k_o= absolute permeability of oil (i.e. with no water present)