Interlock is a smooth, thick knit. You can tell the difference between interlock and regular jersey by looking at the back; interlock looks the same front and back but jersey has different knitting patterns on the back (look at a t-shirt, for example). Interlock is often considered a higher-quality knit for things like kids' clothes; my Lands End layette stuff is all interlock but the less expensive pieces are jersey.
Interlock is arguably a more sturdy material than a regular knit jersey, so if it's being used in a diaper it may help the body last longer or stretch out of shape less.