The term Permanent and Stationary (P&S) refers to a time when your medical condition has reached maximum medical improvement. Meaning you are not getting any worse, and you have reached your best pre-job accident medical condition. And, yes, this is a very important time in your California work comp case because once you are "P&S'ed," a medical doctor can then, at that specific time, assess how much, if any, permanent disability resulted from your work related injury. This report is used to finalize your work comp case. It is a very important time in your case once you reach this stage.
P & S reports also dictate how much reward you will receive in your workers compensation case, in addition, if you were injured on the job but by someone not connected with your employer, you can sue that person or entity and utilize your P & S report at trial before the jury. Especially if you have a high % of impairement to a particular body part or system. A good injury lawyer can help you with this. I use P & S reports all the time when I am suing a third party not connected with my client's employer.
Please note: If your disability is rated under the 2005 schedule you will see the term maximal medical improvement (MMI) used in place of P&S.