A transaction has three states: Uncleared, Cleared and Reconciled.

Uncleared means nothing, for instance, you just entered this transation and have no official confirmation of it.

Cleared state can be assigned if you know that the transaction really has happened. For example, if your bank shows it at the web site you can assign cleared state to the transaction.

Reconciled is the last state in transaction lifestyle. Usually you move several transactions from cleared to reconciled state at the end of the month based on the bank statement. We also developed "Balance account" dialog to make this last step convenient.