This doctrine teaches, in short, that we literally existed prior to birth into mortality on this earth, and were involved in the salvation plan.
See the below excerpts from the Encyclopedia of Mormonism...
Pre-Existence (Pre-Earthly Existence)
The term "pre-existence," or more accurately, "premortal existence," refers to a period of individual conscious and accountable life before
birth into mortality on this earth. It is Latter-day Saint doctrine
that living things existed as individual spirit beings and possessed
varying degrees of intelligence in an active, conscious spirit state
before mortal birth and that the spirit continues to live and function
in the mortal body. The revelations teach that premortal spirit bodies
have general resemblance to their physical counterparts.
Council In Heaven
The Council in Heaven, sometimes called the Grand Council, refers to a
meeting of God the Father with his spirit sons and daughters to
discuss the terms and conditions by which these spirits could come to
earth as physical beings. The terms "Council in Heaven" and "Grand
Council" do not appear in the scriptures, but are used by the Prophet
Joseph Smith in referring to these premortal activities, allusions to
which are found in many scriptures (Job 38:4-7; Jer. 1:5; Rev. 12:3-7;
Alma 13:3-9; D&C 29:36-38; 76:25-29; Moses 4:1-4; Abr. 3:23-28; cf.
Tpjs, pp. 348-49, 357, 365; T&S 4 [Feb. 1, 1843]:82).
One purpose of the heavenly council was to allow the spirits the
opportunity to accept or reject the Father's Plan of Salvation, which
proposed that an earth be created whereon his spirit children could
dwell, each in a physical body. Such a life would serve as a
probationary state "to see if they [would] do all things whatsoever
the Lord their God shall command them" (Abr. 3:25). The spirits of all
mankind were free to accept or reject the Father's plan but they were
also responsible for their choice. The Creation, the Fall, mortality,
the Atonement, the Resurrection, and the Final Judgment were
contemplated and explained in the council (TPJS, p. 220, 348-50; MD,
pp. 163-64; see also First Estate). The plan anticipated mistakes from
inexperience and sin and provided remedies. Many spirits were
foreordained to specific roles and missions during their mortal
experience, conditional upon their willingness and faithfulness in the
premortal sphere and their promised continued faithfulness upon the
earth. The Prophet Joseph Smith explained, "Every man who has a
calling to minister to the inhabitants of the world was ordained to
that very purpose in the Grand Council of heaven before this world
was. I suppose I was ordained to this very office in that Grand
Council" (TPJS, p. 365; cf. 1 Pet. 1:20; Jer. 1:5; Abr. 3:22-23).
Although spoken of as a single council, there may have been multiple
meetings where the gospel was taught and appointments were made. Jesus
and the prophets were foreordained in the council. A redeemer was to
perform a twofold mission in redeeming mankind from the physical and
spiritual deaths brought about by the Fall of Adam and also in
providing redemption, upon repentance, for sins committed by
individuals. At a certain point in the council, the Father asked,
"Whom shall I send [as the Redeemer]?" Jesus Christ, known then as the
great I AM and as Jehovah, answered, "Here am I, send me," and agreed
to follow the Father's plan (Moses 4:1-4; Abr. 3:27). As a
counter-measure, Lucifer offered himself and an amendment to the
Father's plan of saving mankind that would not respect their agency.
The substitute proposal was also designed to exalt Lucifer above the
throne of God. The Father's response was, "I will send the first"
(meaning Jehovah). Lucifer rebelled and became Satan, or "the devil."
A division developed among the spirits, and no spirits were neutral
(DS 1:65-66). There was war in heaven (Rev. 12:7-8), and the third of
the hosts who followed Lucifer were cast out (Rev. 12:4; D&C 29:36).
These rebellious spirits, along with Lucifer, were thrust down to the
earth without physical bodies (Rev. 12:9; cf. Isa. 14:12-17). The
Prophet Joseph Smith explained: "The contention in heaven was-Jesus
said there would be certain souls that would not be saved; and the
devil said he could save them all, and laid his plans before the grand
council, who gave their vote in favor of Jesus Christ. So the devil
rose up in rebellion against God, and was cast down, with all who put
up their heads for him" (TPJS, p. 357). Heavenly Father and the
faithful spirits in heaven wept over them (D&C 76:25-29). Satan and
his followers are still at war with those spirits who have been born
into mortality (Rev. 12:9; cf. "War in Heaven," p. 788).