Xiaomi is the fourth-largest smartphone maker in the world and is particularly popular in India. While it largely sells low- and mid-range devices, it launched the Poco sub-brand in 2018 to compete with high-end smartphones from Samsung, OnePlus and others. However, since the Pocophone F1, the brand has yet to launch another smartphone.
Xiaomi also has the Mi/Redmi sub-brands, which it created to sell smartphones, computers, TVs and other products in Europe and other markets. That brand has remained in-house, however, while it appears to be spinning Poco off into a whole new company.
Details about the brand or its future products are still unknown, though head of Poco Alvin Tse told TechCrunch in 2018 that Poco was working on other smartphones and product categories. It's also unclear what resources (manufacturing, marketing, etc.) the new company will share with its parent.
Poco will be joining a crowded field in a relatively tough market that hasn't grown much in the last few years. Xiaomi itself is now making more premium devices like the K20 Pro and CC9, so Poco will also be competing with its own parent. Similarly, Huawei has had Honor for years, whereas Oppo brought us OnePlus and, more recently, Realme.
Update 1/17/20 10:30PM ET: The article has been updated with the correct spokesperson's name.