What Are Interleaving Operations - Can Atomic Actions Interleave

I have read that when two threads have two steps (of execution) and each step involves many operations, then the operations of both the threads kind of overlap one-another. For example

I think I am not very clear about interleaving actions/operations? Especially when we say that atomic actions can not be interleaved. But

Java Code:

class Counter{
private int c=0;
void increment () {
c++;
}
void readIn () {

[Code] ....

And the following sequence of events occurs.

Thread A: Retrieve cThread A: Increment cThread A: Store the result in cThread B: Ask the user to enter a valueThread B: Read in the value, store it in c

Now the value of c obtained after increment will be lost (Thread Interference). Isn't this an example of interleaving operations?