v:version specifies your current version of Vim. Version 7.0 has version 700, 7.2 has version 702, etc.
Now, version 7 was a very major release with many enhancements to the previous release 6, that introduced man scripting enhancements. For example I believe prior to that version dictionaries, Funcrefs and lists were not available, many functions did not exists, no floating point data type (that one was actually included I believe with 7.2), Tab pages were not possible, Spell checking has been included, Completion functions have been added, the undo branches feature was added, and so on.
So in principle this is just a guard, that your plugin is run by a Vim version, that has all required features needed for the plugin to perform its work.
If you are interested in what feature was added in which version, read the help at
:h new-6, etc...