LVS stands for Layout vs Schematic. It is one of the steps of physical verification; the other one being DRC (Design Rule Check). While DRC only checks for certain layout rules to ensure the design will be manufactured reliably, functional correctness of the design is ensured by LVS.
Layout vs Schematic (LVS) compares the design layout with the design schematic/netlist to tell if the design is functionally equivalent to schematic. For this, the connections are extracted from layout of the design by using a set of rules to convert the layout to connections. These connections are, then compared if they match with the connections of the netlist. If the connections match, the LVS is said to be clean.
