Git Large File Storage (LFS) aims to avoid a limitation of the Git version control system, that it performs poorly when versioning large files, especially binaries. LFS solves this problem by storing the contents of such files on an external server, then instead committing just a text pointer to the path of those assets in the git object database.
Common file types that are stored via LFS tend to be compiled source; graphical assets, like PSDs and JPEGs; or 3D assets. This way resources used by projects can be managed in the same repository, rather than having to maintain a separate management system externally.
LFS was originally developed by GitHub (https://github.com/blog/1986-announcing-git-large-file-storage-lfs); however, Atlasssian had been working on a similar project at nearly the exact same time, called git-lob. Soon these efforts were merged to avoid fragmentation in the industry.