Rotting. If rot has not progressed too far, chisel out the soft wood. Brush pentachlorophenol wood preservative into the holes and over the surrounding wood. Apply at least two coats. Then fill holes with plastic wood.
If rot has progressed so far that sill must be replaced, the entire rotten section should be sawed and chiseled out. Let a carpenter do this job if the cut-out piece is over 4' long, but you can replace a shorter piece yourself. Don't worry about the wall collapsing. Just cut a new timber to size, saturate it with wood preservative, and shove it into place under the studs.
After repairing a sill, be sure to correct whatever condition caused it to rot.