A runtime simply refers to a directory that contains all your jbpm5 jars. The plugin can create a runtime for you.
This was a feature that was ported from Drools Flow though the documentation hasn't been yet. You can see the Drools documentation for a lot more details though:
https://hudson.jboss.org/hudson/job/drools/lastSuccessfulBuild/artifact/trunk/target/docs/drools-flow/html/ch.Drools_Eclipse_IDE_Features.html#d0e2529
If you use the installer, it will install a runtime for you automatically.
Kris