The "housing" the encompasses the fan on the snowblower is referred to as the 'drum' from what I understand. Typically the snow gets pushed into the drum by the main auger, and then the "2nd stage" portion of the blower is the fan itself, pushing the snow through the shute.
Sometimes the shute can get clogged/blocked with heavy wet snow, and the shute itself also restricts the snow from being thrown further (just the nature of the narrow passage and friction of the snow being pushed through.)
A "rotating" drum, means that the housing can actually rotate hydraulically, which bypasses the drum. So, instead of the snow coming out the shute, it exits at a "hole" in the drum BEFORE it goes up the shute, and just gets discharged out the side instead. There is a "hole" on both sides of the drum, and you can rotate it so either of these holes are used, or so they are both blocked, in which case it will go up the shute.
Of course, with the rotating drum in use, you can't aim the snow aside from sending it through either the left side, or right side. However, you can clear a LOT more snow a lot faster, with less power required (your not pushing the snow through the shute.) It's also helpful in heavy wet snow that can clog the shute, in fact, you can completely clog the shute with a block of ice from heavy wet snow, and with it completely clogged, you can rotate the drum open continue blowing the snow.
Here is a video of a larger tractor using a blower with a rotating shute, the provonost P860TRC (the TRC comes standard with the rotating drum as I understand it) Granted, this tractor has 62pto hp which is more than most of us, but you get the idea...