、。
She was playing with her younger sister at the time.
Literal
She [topic-は] that-time, younger-sister [with-と] was-playing-polite.
Past polite progressive (~ていました) anchored by その時. と marks the comitative ('with [whom]') — the same と that appears in と話す ('talk with'), と結婚する ('marry'). 妹 specifically means 'younger sister'; Japanese has dedicated words for older/younger siblings (姉 / 妹, 兄 / 弟), unlike English's age-neutral 'sister/brother.' The 読点 (comma) after 時 reflects a brief speech pause, common in narrative writing.