-i tells Perl that the files read with the diamond operator (<>) are going to be edited in place, and that a backup of the original file will be kept, using the extension specified. So, -i~ will create a copy of the file with a tilde appended to its name.

But, where's the <> coming from? It's from -p, which causes the program to be enclosed into a loop that does a while(<>).

Whether you committed a mistake or not, depends on what you intended to do ;^).