Droop is the measurement of how far down the wheels travel in relation to the chassis when the suspension unloads before they hit the down stops.
More droop equates to greater weight transfer when accelerating or breaking, intensifying the effect.
More rear droop will allow the rear of the car to rise further when breaking/decelerating, shifting more weight to the front and increasing initial turn-in and off power steering.
More front droop causes greater weight transfer to the rear under acceleration, which increases rear traction but reduces on power steering.
It's measured with a ride height gauge - set your ride height first and then set droop by setting the corner of the chassis on the droop gauge at the ride height + desired droop amount mark and turning the droop screw on that corner until the tire just barely lifts off the ground. Every time you change ride height, you'll need to check droop as well.
Once the whole car has been set, verify the left and right sides of the car come off the table at the same time by lifting the chassis by the center point on each end. This bit is very important to ensure the car behaves the same when turning left and right and you haven't introduced artificial tweak.
On a smooth carpet track, start with a 5mm ride height and 2mm of droop all around and tune from there. Running with less than 2mm or more than 2.5mm and you may find some odd handling that you can't explain, so be careful. You'll want to turn this into a standard task when you're pitting if you're running foams as ride height will change each time you go out.
HTH,
Chris