The following is taken from the Pearl of Great Price Student Manual, pg. 38:
Abraham 3:26. What Does it Mean to “Keep” an Estate?

The “first estate” refers to the period of time before we were born on this earth, also known as the premortal life. To “keep” this first estate, a spirit child of God in pre-earth life had to use his or her agency to choose to follow the plan of salvation offered by Heavenly Father. A third part of the spirit children of Heavenly Father followed Lucifer (the devil) and rebelled against God and the plan of salvation, thereby failing to keep their first estate. They were therefore cast out of heaven, with no more opportunity to progress.

The “second estate” refers to mankind’s mortal existence on this earth. This estate is a probationary period in which individuals “prepare to meet God” (Alma 12:24). All who accept and obey the saving principles and ordinances of the gospel of Jesus Christ will receive eternal life, the greatest gift of God, and will have “glory added upon their heads forever and ever” (Abraham 3:26). Those who do not have the opportunity to accept and live the gospel in mortality are given that opportunity in the spirit world, after they die.

Additional insight on the first and second estates is offered by Elder Neal A. Maxwell:
“Premortality is not a relaxing doctrine. For each of us, there are choices to be made, incessant and difficult chores to be done, ironies and adversities to be experienced, time to be well spent, talents and gifts to be well employed. Just because we were chosen ‘there and then,’ surely does not mean we can be indifferent ‘here and now.’ . . .

“In fact, adequacy in the first estate may merely have ensured a stern, second estate with more duties and no immunities! Additional tutoring and suffering appears to be the pattern for the Lord’s most apt pupils. (See Mosiah 3:19; 1 Peter 4:19.) Our existence, therefore, is a continuum matched by God’s stretching curriculum. . . .

“Agreeing to enter this second estate, therefore, was like agreeing in advance to anesthetic—the anesthetic of forgetfulness. Doctors do not deanesthetize a patient, in the midst of what was previously authorized, to ask him, again, if it should be continued. We agreed to come here and to undergo certain experiences under certain conditions” (in Conference Report, Oct. 1985, 21; or Ensign, Nov. 1985, 17).