Whetstone means a tool which is used to for cutting or sharpening a machine part or a tool. When tools used in an workshop turn blunt, they are sharpened by the whetstone. They are as useful as if they are new.
Generally the intelligence of people becomes sort of dull as they do their regular duties or works. They tend to become less learning and remain unexposed to many happenings outside in the world. Also, the skill levels tend to saturate after certain time.
Competitions are like the whetstones. People are to participate in competitions either for personal growth or for the growth of their organization. There is an incentive for doing better during the competition. Also, for many the challenge of winning in the competition brings out some hidden talent. They perform much better during the competition. The participants learn from others and their mistakes and they become speedier too.
Whatever it is the competition acts on the people like a whetstone on machine tools in the sense that the participants become more active, more knowledgeable and better performing than before. So the talent is sharpened.
This is one of the reasons for many international or national organizations to hold come competitions among their employees periodically. The competitions rejuvenate people. For students in the learning stages, they reach a higher level in the field they have skills.