It simply tells you where the team who picked the player had that player ranked on their own list. So the first pick is always that team's number 1 choice. The second overall pick has a good chance of being that's team number one preference as well, but if not it can't be any worse than two since only one player has already been picked and isn't available.
As for your second question, of course the lower seeds are more likely to get their first and second picks. Every team has their picks made in the order they rank them. If the guy you ranked one is gone, then you'll get the guy you ranked as number two. If he's also gone, you'll get number three and so on. Obviously the lower seeds have fewer people picking before them, so they are more likely to have the guys at the top of their list still available when it is their turn. And given that each team has different data on the players based on how they each spent their draft points, and the fact that each initial list is random, each team's lists are likely to be very different.