The past continuous shows us that the action was already in progress at a certain time in the past.

Examine situation 1 :
Yesterday, Paul exercised at the gym.
He began at 5 pm
He finished at 7 pm
So, at 6pm, he was exercising at the gym.

He was exercising ⇒ He was in the middle of exercising.

FORM :
Subject + was/were + Verb ING = PAST CONTINUOUS

Examine situation 2 :
When we use these two tenses together, it shows us that the past simple action happened in the middle of the past continuous action, while it was in progress.

The past continuous is used when an action in the past is interrupted by another past action.

Paul was exercising (he was in the process of exercising) between 5pm and 7pm
6pm : George arrived.

George arrived = past simple.

SUMMARY :
We often use the past continuous and the past simple together to say that something happened in the middle of something else.

EXAMPLE : 
Paul was exercising at the gym when George arrived.