That's difficult without seeing the complete DFSORT/ICETOOL job since there's probably more to it then you're showing.
Where did you find these statements? What does the complete job look like? What does the input look like?
Just going by what you show, whenever records with the same value in positions 12-19 are found, the base record (first record with the value) is spliced in turn with each overlay record (second record with the value, third record with the value, etc). Each spliced record consists of the base record overlayed with positions 20-66 from the overlay record.
The OUTFIL statement is performed after the SPLICE. It omits any output records that have a 'B' in 80 and ensures that the output records only contain positions 1-66.
For complete details on the SPLICE operator of DFSORT's ICETOOL with examples, see: