Preferential is where on your ballot you number the candidates from your best choice "1" down to your worst option "5" (if there are 5 candidates)
Preferential voting gives a level field for new candidates and ideas, and breaks down the duopoly of a 2 party only landscape.
Vote without Risk
Example of the people of Colourville:
100 people live in Colourville. 40 like yellow and 60 like blue. Their current leader is Mr Purple, but behold, this election a new person is on the seen - Mr Tru Blue. Also running again is Mr Yellow. Without a preferential system most people would vote for the entrenched Mr Purple, even though they prefer Mr Blue. Their fear is that not every one knows about Mr Blue, and that if they don't vote for Mr Purple, Mr Yellow will get in with his loyal 40 followers. But since Colourville has the preferential system things are different - 40 people vote for Mr Blue (with Mr Purple as their second choice). The other 20 Blue People vote for Mr Purple with Mr Blue as their second choice.
So what happens? Since Mr Purple has the least primary vote (20) his votes go to Mr Blue bringing his total to the full 60 votes - vs Mr Yellow's 40. The net result is the people ofColourville got a leader closer to what they wanted. They got a real Blue rather than a Purple, even though he was less well known.
Party Preferences are "Suggestions"
It is common around election time for political parties to trade preferences -The Yellow Party may say to the Green Party "I'll put tell our supporters to put you second if you tell your supporters to put us second". Then they produce cards which are handed out at polling booths how to vote along their party lines. But you don't have to follow their"advice". Often their greatest rival they will tell you put last, so they have less chance of getting in. My suggestion is to do your homework, and if you vote Yellow, put them 1st, and then Orange 2nd and Ochre 3rd.
Remember preferential voting done properly keeps the big powers on their toes - and lets you vote for your best candidate without risk.