this is used for show the records in the tree view which has the states only in  'progress' ( Sales Order),'waiting_date'( Waiting Schedule),'manual'( Sale to Invoice )..This restricts the tree view with only these three states.if you used onlu 'progress' in the domain,you can see the state of "Sales Order" in the tree view (that means "Status" field in tree view).

The meaning of this code is,

Domain is the column inside particular model. 

Though, you have not paste the exact block of code from sale_view.xml, I assume that "Domain" column is under the "ir.actions.act_window"  model. If this line is exactly under that action then meaning is :

Only those sale orders, which are either is in progress, waiting or manual stage, those are only allowed in this action's list view.

Result of this line will be reflected under Sales >> Sales >> Sales Order. At that menu, you will not able to see the orders which are in "Quotation" State.

I am sure this will help !