pwd is short for "print working directory". The terminal is always standing inside exactly one folder, and pwd tells you which one.

The answer, /home/ada, is a path, and it reads from left to right: inside / (the very top of the whole machine), inside home, inside ada. That last folder is the personal one belonging to somebody called ada, and it is where a terminal usually starts. It is the same folder the ~ in your prompt is standing in for.