What does they’re mean?

Last but not least, they’re is a contraction that means “they are.” This makes it a little easier to distinguish from its fellow homonyms, as you can always check if it’s the right word by stretching out the contraction into its full form and asking whether it still makes sense.

If you can substitute they are without changing the meaning of the sentence, they’re will also work. 

Did you hear they’re both retiring after this school year?

Just like the contractions of you are into you’re and we are into we’re, they’re is a mash-up of two words. It’s important to mention that contractions are frowned upon in academic or formal writing and are more typical in informal communications, like texts or personal notes.