Prep Actions are any action taken on a raw ingredient that will affect it's yield percentage (meaning the amount of the product that is left over after you take an action on it, i.e. waste) and/or it's conversion from weight to volume to each.
You can create a new prep action right from the drop down when creating ingredients
Or you can create them in the ingredient detail page
Why is this important?
Getting accurate costs is extremely difficult (almost impossible) without prep actions
If you want to be able to accurately convert an ingredient from grams to cups (or any weight to volume or each unit of measure) in a recipe, use prep actions!