Adjustment of status is the process that allows you to apply for lawful permanent resident status, and become a green card holder, when you are physically present in the USA. It means that you may get a green card without returning to your home country to complete visa processing.
So if you are inside the United States and you want to apply for permanent resident status, you should use Form I-485, Application to Register Permanent Residence or Adjust Status.
The immigration law and certain federal laws provide many different ways to adjust status to that of a lawful permanent resident. The eligibility requirements for adjustment of status may vary depending on the immigrant category you are applying under. These immigrant categories include, but are not limited to: family relationship; employment; K-1 visa holder; refugee status; Panama Canal Zone employees and physicians; Polish or Hungarian parolee; certain U.S. armed forces members. Each of the above mentioned categories has specific criteria which must be met and additionally documented when filing Form I-485.
As for the applicants living outside the USA, they are not eligible to file Form I-485. Applicants living abroad who have an approved immigrant petition need to file for an immigrant visa with a US consulate abroad. This pathway is called consular processing.