This is a congregation of countries within a boundary known as the European Economic Area, and it ensures a unification of the economic activities within the UK basically, so that they enjoy the same rights to live and work within the UK.
This settlement scheme is for EEA nationals, especially with regards to the British exit from the EU. The pre-settled status is for EU citizens and family of EEA nationals who have not lived in the UK for a continuous period of five years. Upon payment of a fee, they can apply to change their status to settled status. The pre-settled status ensures that once you have resided in the UK for a total of 5 years, you can apply for settled status. This status implies that they have limited leave to remain within the UK. They have to, however be in residing in the UK by 31 December 2020 by the time they make the application.
When they have settled in the UK continuously for 5 years, they can then apply to be given a settled status, also known as the Indefinite Leave to Remain (ILR).