Pre conditions means the conditions which are manditory for 
executing the test case.
for example we are testing a internet banking application
Following are the preconditions:
1.the user should be Internet Banking User
2.user should have valid credentials
3.User should have one active account Ect...

Describe the point in the flow of the application at which
the current business component starts. 

For example:For Login Test case

The Flight Reservations application must be closed.