Lore proficiencies are an extreme knowledge of a very specific field. Some are specifically called X Lore, and others, such as Local History and the like, are Lore with a very specific area.
A Lore proficiency in the party can be used by the DM to provide information ("Jeff, you remember a story when you were growing up about evil faeries that lived in the trees of the Dark Forest, and this reminds you of that story") or a player can use it as a skill check prompt ("I have Necromantic Lore, can I roll to see if I have any idea what this floaty skull thing is?".) Lore can be used as an enhancement to another skill, such as disguise. A person with both "Spirit Lore" and "Disguise" could probably pull off a pretty good lich impersonation, for example.
Most Lore skills are either bonus proficiencies (granted for living in an area, for example) or Priest/Mage proficiencies. You can think of this as having access to books and the like. A person training as a fighter will generally have a harder time learning such proficiencies (thus the extra slot.)
Lore can be acquired by study, but also can be learned from books, listening to bards and other sources.
Here are some example Lore Proficiencies, from various supplements:
Ancient History: (Mage, 1 slot, INT-1) The character has learned the legends, lore, and history of some ancient time and place. The knowledge must be specific, just as a historian would specialize today in the English Middle Ages, the Italian Renaissance, or the Roman Republic before Caesar. (The DM either can have ancient periods in mind for his game or can allow the players to name and designate them.) Thus, a player character could know details about the Age of Thorac Dragonking or the Time of the Sea-Raiders or whatever else was available. The knowledge acquired gives the character familiarity with the principal legends, historical events, characters, locations, battles, breakthroughs (scientific, cultural, and magical), unsolved mysteries, crafts, and oddities of the time....l.
Animal Lore: (Warrior, 1 slot, INT) This proficiency enables a character to observe the actions or habitat of an animal and interpret what is going on. Actions can show how dangerous the creature is, whether it is hungry, protecting its young, or defending a nearby den. Furthermore, careful observation of signs and behaviors can even indicate the location of a water hole, animal herd, predator, or impending danger, such as a forest fire. The DM will secretly roll a proficiency check. A successful check means the character understood the basic actions of the creature. If the check fails by 4 or less, no information is gained. If the check fails by 5 or more, the character misinterprets the actions of the animal
Local History: (Rogue, 1 slot, CHR)The character is a storehouse of facts about the history of a region the size of a large county or a small province. The character knows when the ruined tower on the hill was built and who built it (and what happened to him), what great heroes and villains fought and fell at the old battlefield, what great treasure is supposed to be kept in a local temple, how the mayor of the next town miraculously grew hair on his balding pate, and more. The DM will provide information about local sites and events as the character needs to know them...
Netherworld Knowledge: (Priest/Mage, 2 slots, WIS-3) With this proficiency, a character learns about the cosmology and organization of the AD&D® game multiverse, focusing primarily on the ultimate destination of spirits after death: the Outer Planes. In addition, the character learns about behavior of the dangerous creatures that inhabit the nether regions, including such fiends as the tanar'ri and the baatezu....
Undead Knowledge:(Priest/Mage, 1 slots, WIS) A character with Undead Knowledge is well versed in the lore of undead creatures, including ghosts, wraiths, zombies, and...