Basically its a time loop/paradox thing:

1. Edea creates Garden and SeeD to defend the planet from sorceresses.

2. Squall becomes a SeeD.

3. Squall defends planet from evil sorceresses.

4. Squall goes back in time and meets Edea when she was still Matron of the orphanage he was at (about 12 years in the past, since Squall seemed about 5 in the past)

5. Squall tells Edea all about Garden and SeeD, and gives her the idea to create it.

6. Edea creates Garden and SeeD.

As for what it stands for, SeeDs are pretty much "flowers" so to speak. Although I personally prefer to pronounce it "CD" it has been said that translators capitalized the D arbitraily, and that the whole theme of "Gardens" filled with "seeds" is stated throughout the game, the flower field at Edea's house being a metaphor for her "garden" etc.