Prone creatures are those that are lying on the ground. They are incapacitated and considered flat-footed, losing their dexterity bonus to armor class. Creatures attacking a prone individual in melee combat get a +4 bonus to their attack roll, while those attacking with a ranged weapon get a -4 penalty to their attack roll.
A creature who becomes prone while sleeping, dazed, or stunned will be able to attack, even though each of these conditions individually prohibit attacking.
The more common sources of the prone condition include the knockdown feat and spells (such as grease and Balagarn's iron horn).