It's basically the difference between what your hair looks like dry and what your hair looks like wet. It's also more noticeable in type 4 curls (such as mine) because of the tight curl pattern. My hair for example, shrinks by approximately 80% of the actual length!
You can't really prevent shrinkage, due to the nature of the curl pattern. However, you can stretch the hair as it dries (i.e, using twists, bantu knots) to help achieve bigger hair. You can also try shampooing in braids or sections to help keep the hair in a stretched state when its wet.
I use to hate shrinkage, especially when I was growing out my hair because it appeared like I wasn't making any progress. Sometimes it's easy to get discouraged because we feel our hair isn't growing fast enough or isn't achieving the length we want it to. Your hair can achieve length, it just shrinks as it goes from wet to dry so it's hard to tell. Don't get discouraged, the sooner you embrace your hair, the sooner you'll begin to realize how unique and versatile it truly is :)