。
She sat surrounded by her children.
Literal
She [topic-は] children [by-に] being-surrounded sitting was.
囲まれる ('to be surrounded') is the passive of 囲む ('to surround'). The agent of the passive — the surrounders — takes に: 子供達に囲まれて ('surrounded by [her] children'). The te-form chain 囲まれて...座っていた links the cause (being surrounded) to the resulting posture (sitting). The whole image is warm — a mother sitting among her children, embraced by them. The Japanese passive can carry positive feeling here, unlike the often-translated 'adversative passive.'