This phrase pertains to the importance of language in any society. The party argues that reality is not fixed but can be changed simply by using words to do it. They can say 2 plus 2 equals 5 and make it true, just as they can say a certain person never lived--just eliminate all words written about that person and all evidence disappears. By controlling language, therefore, the party can control the past, make it whatever they want it to be or not be, and in doing this they will control the present as well. Truth lodges itself in language rather than in a reality external to it. This is what Winston desperately to refuse to believe, but under torture finally succumbs to the power of language controlling and shaping reality.
This phrase is talking about the way that the Party changes history to fit its purposes. History is fluid in this society and it is changed so that it matches the doctrines and principles that the society is promoting at any given moment for whatever purpose. If a society can control the past/history by changing it, then that society can also control the minds and inner workings of its society in the present. In Oceania, the country is always at war with someone. War stimulates the economy and makes it possible for the Inner Party to explain shortages of products that may be mas produced but only distributed to the Inner Party. History in Oceania always says that it's been at war with the same country and has always been at war with the same country, even though the countries that Oceania is actually warring with change. This is often due to some Inner Party reason like treaties and trade deals that are struck up with warring countries. If a trade deal or treaty is forged then Oceania cannot be at war with that country any longer so they choose a different one and rewrite history to fit. It's scary because no one can ever know what the past was like. They cannot learn from their mistakes because there are none. People can ebb in and out of existence without anyone ever remembering that they were there. No one can ever be a martyr against the party if no one ever knows that one existed.