Goodwill appears when a company buys another business for more than its assets are worth on paper: the premium gets recorded as goodwill on the buyer's balance sheet. It represents whatever justified overpaying, brand, customers, expected synergies.
For example, if you buy the rival café across the street for $300,000 when its machines, furniture, and stock total $200,000, the extra $100,000, paid for its location and loyal regulars, sits on your books as goodwill.
Steady or shrinking goodwill means the company is not constantly paying premiums for acquisitions. A goodwill pile growing through a string of deals deserves suspicion: acquisitions destroy value more often than they create it, and a rising balance alongside flat earnings often ends in a goodwill write-down, a large charge admitting the company overpaid.