The roster is your contact list. When you add a contact to your roster, you usually subscribe to the users presence by doing so. The presence is a bit of information which is sent by the client of your contact to the server. The server than serves the presence to all users who have subscribed to the presence of the contact.
The presence contains a status like “available”, the avatar of the user and so on.
You should read a little more about XMPP to get more familiar with it.