cultivation means exactly that, cultivating to reach a higher level of being.
In most Chinese wuxia novels (which means fantasy novel with fighting in old time), it's believed that by training your body and your mind, you will slowly get stronger and eventually break through to higher realms of beings.
Most of them follow this cultivation structure:
1. Qi Refinement Stage: Chi, Ki, however you call it, it's basically magic power inside your body that needs to be awaken and refined. If a character can't use their Qi they can't cultivate at all.
2. Body Foundation Stage: like the name said, it's about training your body for strength, cleansing the body of waste and creating Dao foundation.
3. Golden Core/Core Formation Stage: the cultivators literally created a core inside their body to store Qi.
4. Nascent Soul Stage: this varies from stories to stories but the basic is that this stage allows cultivators to have extra lives.
after that is free game, author can choose to create whatever the hell they want. Some stories create a few more stages, some go to a higher realm (mortal -> fairy -> immortal -> ???).
However, in most stories, stage 3 and 4 are already hard to achieve, with few cultivators reaching those stages, so they're kinda endgame in them.
hope this helps.