Precedent refers to a standard that has been set in law due to a decision of a particular court ruling. The ruling can be referred back to when similar matters are being dealt with.
Once a precedent has been established, it is used as an example that similar issues, which may come up, can follow.
Precedent allows both lawyers and citizens alike to have a general expectation of the law when it comes to certain issues. For example, if a precedent has been set about cases related to causing injuries while driving a car under the influence, then it can be relatively clear to everyone involved in a similar legal situation what the consequences are, and what the ruling is likely to be.
Precedents save the courts time because very similar cases can have the same implications.