Launching satellites into space is really, really expensive. We're talking upwards of $10,000 per pound to geosynchronous orbit. DARPA is looking to make the deployment of new satellites much cheaper, by simply recycling the satellites that are up there already using an unmanned platform that can harvest them for parts.
There is currently about $300 billion worth of satellites up in geosynchronous orbits, and a bunch of them don't work anymore. Generally, all that "don't work anymore" means is that one single critical component has failed, rendering the satellite useless even if 90% of it works just as well as the day it was launched.
That 90% of stuff represents a lot of useful and expensive hardware. At the top of the list is the satellite's antenna, which (due to its size) represents the single biggest contributor to both functionality and launch cost. What DARPA wants to do is send a harvester satellite called Phoenix up there to rip off things like antennas and solar panels from dead platforms and hack them back together into operational zombie satellites. Tiny new controller modules called "satlets" will ride along with the harvester and be used to create new brains to get the zombie parts all working together properly, effectively creating an entirely new satellite. Sounds easy enough, right?
One major hurdle is that satellites out that far in space were not launched with the expectation that it would ever be possible to service them. So, they're not exactly easy to take apart, meaning that any harvester system will need to be able to cut through metal casings and rip out subsystems that were never intended to be ripped out. It'll probably all be done through telepresence, with a human on the ground directly controlling the appendages and tools on the harvester satellite.
If you've got a satellite up there already, don't worry, this isn't going to be some illicit grave-robbing mission to create hordes of evil Frankensatellites; DARPA says the agency will make sure and get permission before it chops anything up for scrap. It's also conceivable, though, that a system like Phoenix could be used in an anti-satellite capacity, grabbing onto enemy satellites and either rending them solar panel from solar panel or installing new controller hardware to repurpose them.
While DARPA in no way suggests that this is how it would work, it seems like there could be a new Bond movie in there somewhere, so it must be at least a little bit true.