In LSMW there are three steps:
1.) Upload the file from the Source. Which is done in the first tab.
2.) Read File : This would read the data records from the file path you have given. You can see the data read from Tab Show READ Data. From this you can see if the Data has been read successfully.
3.) Conv File : This is for converting the file in the format which you want to Upload. Your File Conversion depends upon the FIELD mapping you are doing in Step 5 of your LSMW, Conversion file is finally transferred to the SAP system via method you use to transfer the data in SAP system.
Hope this will help you to understand the terms.