The witches speak this line, in the first scene of the play. They have just announced their intention to "meet again," specifically with Macbeth, after the "battle's lost and won." We do not know what they have planned, but we can tell that they do not mean well, and that their meeting with Macbeth portends great evil. They fly away through a storm, chanting the rhyme mentioned in the question. This sets the stage for the play in an important way. The idea that things are not as they appear--that what appears to be fair is actually foul--is a running theme in the play. Macbeth's apparent loyalty to Duncan disguises his treachery, his ascent to the throne is built upon the murder of a most fair monarch, and Lady Macbeth casts aside her femininity--an act that would have been viewed as "foul" to Shakespeare's audiences--to plot the murder of Duncan. Moreover, the witches themselves offer up prophecies that seem very good for Macbeth, but are in fact ruinous.