Liquidity pools are pools of two tokens or more locked in smart contracts that provide liquidity in decentralized exchanges. This ensures that you can trade some amount of the crypto's in the LP at any time.
When you place your funds into a liquidity pool you're able to earn some of the transaction fees that the buyer/seller pays to transact. In addition to trade fees you can also earn AQUA. If the vaults are aggregated from another protocol, Planet Finance's protocol will automatically take the additional reward token you earn and convert it for you into the tokens you've deposited into the liquidity pool.