It has been a year since Israel fled Egypt. They have been wandering the desert following wherever God was taking them. They have witnessed the Red Sea parting for them to cross, manna raining from heaven to feed them, and Mount Sinai become covered in fire and smoke in the presence of God. It came time to celebrate God's mercy that was shown to them during the tenth plague in Egypt, the death of the firstborn. By sacrificing a lamb and painting it's blood on their doorposts the plague passed over the Israelite families and only affected the Egyptians.
Just as Israel was totally dependent upon God to save them from Egypt they were totally dependent on God to take them where they needed to go and when they needed to leave. This was symbolized by a pillar of cloud by day which turned to fire at night. They would follow these pillars wherever they went and when they were to stay at a place the cloud or fire would sit over top the tabernacle, the tent in which God dwelt and the sacrifices were made.
This wasn't just a tiny camp but a whole nation. They counted about 544,250 Israelites at one time. But that was only the soldiers, that's not even including women and children! This was a massive amount of people living in tents in the wilderness. All these people waited upon God to tell them when to leave and when to stay. When the cloud or fire left the tabernacle they packed up and headed out until the cloud or fire stopped.
This outward sign of a pillar of cloud or pillar of fire was a guiding point for the Israelites. God has replaced that physical sign with His Word and the Holy Spirit. Instead of following around a cloud we have God dwelling within us to guide us. He does this through convictions and the Bible. The Spirit interprets the Bible to us by making it speak exactly where we are at. Sometimes a verse just hits us and that is God guiding us!