It's making use of C digraphs which were amendments to the C standard in 1994 and therefore part of the C99 standard. Swapping the digraphs out with their actual characters, you get:
#include <stdio.h>
#define M(a,b) a##b
main()
{
  int a=1, b=2, ab[]={10,20}, c;
  printf( "%d", M(a,b)[a] );
  printf( "%d", M(a,b)[a]?a:b );
  printf( "%d", c=M(a,b)[a]?a:b );
}
So, keep in mind that a##b will merge together the input into a single identifier. Since the macro is just passed a and b, the result is just ab, so you effectively have:
main()
{
  int a=1, b=2, ab[]={10,20}, c;
  printf( "%d", ab[a] );
  printf( "%d", ab[a]?a:b );
  printf( "%d", c=ab[a]?a:b );
}
The assignment to c is not really relevant, so we can get rid of that:
main()
{
  int a=1, b=2, ab[]={10,20};
  printf( "%d", ab[a] );
  printf( "%d", ab[a]?a:b );
  printf( "%d", ab[a]?a:b );
}
Now, let's get rid of the ternary operator (?:), because we can work it out statically (ab[a] is always true because a is 1 and ab[1] is 20, i.e. non-zero):
main()
{
  int a=1, b=2, ab[]={10,20};
  printf( "%d", ab[a] );
  printf( "%d", a );
  printf( "%d", a );
}
Now, replace variables with their actual values, i.e. ab[a] with 20 and a with 1
main()
{
  int a=1, b=2, ab[]={10,20};
  printf( "%d", 20 );
  printf( "%d", 1 );
  printf( "%d", 1 );
}