The Northwest Ordinance was one of the first pieces of legislations created by the congress of the Continental Congress before we were even a country. It established the first territory in the U.S. and set a precedent about how lands in the west would be settled and that the federal government would maintain control over territories rather than states simply expanding.
The way it worked was simple. Lands controlled by the U.S. but not part of a state would be known as a territory and would be under the direct control of the federal government. A civil government would be formed to help manage the land, but all officers would be appointed by the federal government. Territories would have to apply for statehood only after they had accumulated a certain amount of people and created a state government and a constitution.
Westward movement didn’t need much encouragement. People were already flooding west as the revolution drew to a close because of the draw of available, but not free, land in the west. As part of its duties, the federal government would survey and divide the new territory up into parcels for sale and make sure the purchase of these lands was properly recorded. Although lands in the Northwest Territory were cheaper than those back east, they were not free. The federal government sold
I included a link below which may help explain things better. It's from a Google Book, so you should be able to use it as a scholarly source in class.