The PRIORVALUE function gets the previous value of a field that is the same value if the record is being created, or the real previous value if the record is being updated.
You could use it to prevent users from updating important fields in specific conditions, such as changing the opportunity amount once it is closed or transition a case to a Closed status if the previous status is Cancelled:
AND( ISPICKVAL( PRIORVALUE(Status), 'Cancelled'), ISPICKVAL(Status, 'Closed'))
What is the ISPICKVAL value? When dealing with picklists, you should use this function to check whether a picklist list field equals a certain value:
AND( PRIORVALUE(Amount) <> Amount, IsClosed)
The preceding opportunity's example is simpler as it states that ...
