What is LVM ?
 

While installing debian I found that it was asking to use entire disk and configure LVM..
What this lvm means and is it better to set up this while installing debian?

LVM - Logical Volume Management.

If you use LVM partitioning in any Linux , you can dynamically resize(extend/shrink) your harddrive after installing OS without loosing data.

Search in google to know details.

LVM is Logical Volume Management, which separates the volumes that your system 'sees' from the actual hardware that is installed. You put your hardware (disks) into a pool, then use space from that pool, allocating it as logical disks (volumes) This allows you to allocate space to different tasks or users and gives you more control over it/them. You can also re-allocate and re distribute the space at any time if you need to.

The linux LVM documentation is recommended reading: LVM HOWTO - The Linux Documentation Project
tldp.org/HOWTO/LVM-HOWTO/

In addition to the other posts, make sure you use a filesystem within an LVM like ext4 if you plan to do any shrinking within a LVM. Some like XFS or JFS can only be expanded. Also Ive read LVMs work best in tandem with RAIDS.