During the suction stroke of the pump assembly the gas comes out of solution and expands due to the low pressure of the fluid inside the pump. This expanded gas displaces fluid in the pump and reduces the amount of fluid pumped per cycle of pump operation. It often even reaches the point where no fluid is lifted by the pump because the pump merely operates on a charge of gas, alternately compressing and expanding it, and a pump efficiency consequently drops to zero.
This is due to the fact that with a large volume of the relatively compressible gas, the pressure between the standing valve and traveling valve on the pump down stroke never reaches high enough level to overcome the hydrostatic pressure of the fluid on top of the traveling valve to open the traveling valve and pump the gas upward out of the pump.
Horizontal wells can be particularly subject to gas interference as they do not have a sump or cellar, which on vertical wells can act as a natural downhole gas separator.