what does this mean when converting MScore 2 to Mscore 3

If you say yes, 3.0 will only rely on it's auto placement to place items. If you say no, it will keep the changes you made manually in version 2.1. I would try saying yes. If it's totally unacceptable close and reopen and say no. Pick the results you like better.

To answer more literally, since the term is used elsewhere - an "element" is anything you can see in your score. notes, resets, text, slurs, articulations - if you see it in your score, it's an element.