Let's say you hit your tee shot on a par 4 and you have 200 yards left to get to the green. But there's a creek running across the fairway right in front of the green. You can try to hit your ball over the creek and onto the green, but you're just not sure you can carry the ball far enough to clear that water.
So instead of attempting that risky shot, you decided to "lay up" in front of the creek. Rather that taking a long iron or fairway wood for that long approach shot, you might choose instead to play a short iron or wedge and hit the ball around, say, 130 yards. That lay up shot would leave you a very manageable 70 yards to the green, a short shot that likely takes the water out of play.
Lay up shots are a common factor in good course management.
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"I'm not sure I can clear those bunkers, so I'm going to lay up in front of them."

