The random seed can be thought of as a series of random numbers that is created whenthe game is started. When this option is checked the sequesnce of numbers is preserved when you save and reload. When it is unchecked the series of random numbers is regenerated every time you reload.
When 'preserve random seed' is not checked you can reload a save just before a battle and get different results every time. When it is checked you wil always get the same outcome.
There is an FAQ and Newbie thread stickied at the top of the General Discussions forum for just this kind of question. I just looked and indeed this is in the FAQ.
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