Question

When he enterd, i_
( play) guitar

Answer 1

When he entered, I was playing guitar. This is an example of past continuous tense.  

The past continuous tense is formed by combining the past tense of to be with the verb's present participle.

There are many situations in which this verb tense might be used in a sentence. The given line talks about the time frame when he entered and he saw me playing guitar.