The Steem proposal system (Steem.DAO) is something that blocktrades developed and can first be seen here:
https://steemit.com/blocktrades/@blocktrades/proposing-a-worker-proposal-system-for-steem
The idea is to have an automated system built in the chain that anyone can “propose” something for funding. Then if enough stake holders vote for it, it will receive funding.
It’s a mechanism used on many blockchains and can fund community development, marketing, PR, or whatever the proposals the community brings forward.
It’s been discussed in line with the Steem community foundation since January. Blocktrades finished the code and now the Steemit devs have been preparing to merge it. This was the reason for scheduling HF21. Funding was still something that needed to be decided through, which is one of the current discussions.
I hope that helps clear it up.