Short answer: It stands for "Preferred Roaming List", and it is used by the phone to locate different cell systems.
Long answer: The PRL is a list of bands and channels in order of preference which the phone uses when it attempts to locate and connect to a cell system, such as when you first turn the phone on.
Among other things, when your cell provider makes a deal with some other cellular provider to give you a roaming discount, the PRL will be updated to include that second provider's systems. Your phone can find a system which is not on the PRL, but it will try to find a system on the PRL before it uses one which isn't on it.
But the PRL is more than that. It's also used to find your own provider's systems. That's because your provider may not be using the same band in every market.
In 800 MHz cellular, each market has two bands called A and B. When the 1900 MHz PCS bands were opened, there were six named A, B, C, D, E and F. These have been auctioned off in groups by the FCC, and even providers trying to build nationwide systems have ended up with different bands in different areas. When you travel from one city covered by your provider to a different one, the PRL tells your phone how to locate your provider there.
If you have an 800 MHz dual-mode phone or a 1900 MHz dual-band phone, or a tri-mode phone, then you have the ability to use AMPS if your phone can't find CDMA coverage. The PRL tells your phone how to locate AMPS coverage.
And even when you stay at home, the PRL helps. CDMA uses two spread-spectrum carriers which utilize 1.25 MHz each, but each of the licensed bands is actually much larger than that. Initially, most CDMA providers have deployed to use a single carrier system-wide in any given coverage area. But as traffic levels rise, they can and do deploy a second or third carrier frequency within the band, in order to increase capacity. The PRL helps your phone to find these.
The PRL is stored in your phone, but it can be updated. This can be done at a phone store with proper equipment, but increasingly it is becoming more common to do it over the air. To make that happen, you would dial a certain phone number. The process takes a couple of minutes. Not all providers support this capability. For more information about this, consult your provider.
Typically, if you are not having trouble with coverage, you don't need to concern yourself with PRL updates. But it doesn't hurt anything to ask about it every six months or so.