Eleven years before the events in this chapter, Winston had seen a picture that proved that something that the Party said was false. In this chapter, O'Brien shows Winston a copy of that picture. He then throws it in the incinerator and tells Winston that the picture never existed. Winston says that he remembers the picture and therefore it existed. O'Brien says that he does not remember the picture and therefore it does not exist.
By doing this, O'Brien shows the power of doublethink and how that can change the past. By being able to truly forget the picture and to forget that he had forgotten, O'Brien can change the past. Once everyone forgets what really happened, the past has changed and a false "memory" becomes the actual "truth" because that is what everyone remembers.