Let’s consider this scenario: Studnet on F1 OPT has applied for H-1b Visa with Change of Status (COS) petition. But, USCIS approved the H-1B petition but denied the COS. Which means, there will be no automatic F1 to H1B status change. Instead, one has to travel outside the US, attend visa interview for H1B Visa and enter the country with New I-94 for H-1B Status.
This process of traveling, attending the interview and entering the on H1B Visa is referred as Consular Processing.
For instance, if you are applying for the Green Card, the final stage is filing I-485 or Consular Processing. Where I-485 is called Adjustment of Status (to Green Card holder) or attend the interview in any Consular Post (Visa Post) and enter the country as Permanent Resident.
Here’s a more recent example of H1B Visa through Consular Processing.