A freeze is a kind of computer bug that causes the whole game to hang. When this happens, the only way to restore functionality to the game is for the program to restart (and on arcade hardware, this often means the hardware itself has to restart, though even primitive fighting game hardware often has watchdog timers to automate this process).
Certain games are very buggy; in particular, the KOF series is rather infamous for freeze glitches on its NEO·GEO incarnations. Usually, the oversight that causes a fighting game to freeze is not the game system itself, but some property of the background graphics, or the implmentation of a specific character’s move.