Wow--I actually talked of this yesterday! How neat. Ok, first let me try to define this in my own words: Prophecy is the foretelling of something. In the LDS Church, prophecy is often used to give us hope of something great to come (like Christ's birth was prophesied for many thousands of years, and how His Second Coming is prophesied about now) or it is used to warn us of what will happen if we don't repent (as we see often throughout all of the LDS works of scripture as well as today).
I found this on LDS.org: “Latter-day Saints believe in both ancient and modern ; indeed, continuing prophetic guidance is held to be a characteristic or sign of the true church. These concepts were an integral part of the LDS Church's origin and restoration, and they continue to distinguish the Church from many other religious movements” (Encyclopedia of Mormonism , 3:1160).
I think a crucial thing to know about prophecy is that it must come from a person who has authority to prophesy. I am not one who has that authority. We believe that 15 men are on this earth who have been given the Priesthood keys of prophecy (and they make up the First Presidency and the Quorum of the Twelve Apostles).