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A "(fill in category) guarantee" means that you are guaranteed to get a cabin in the reserved category or a higher category. If you are upgraded to a higher category, you'll get the upgrade at no additional charge.
The advantages of booking a guaranteed category instead of specific cabin # are that (1) the cost is often lower than if you book a specific cabin and (2) you are more likely to get a free upgrade.
The disadvantage of booking a guaranteed category is that you might well get stuck in a cabin that is close to the bow where you'll feel the ship's motion much more than in a mid-ship cabin or you might wind up in a cabin with a dance floor or the ship's engines or some other noisy activity immediately above or below your cabin.
I always book a specific cabin after researching the ship's deck plan and checking the ship's reviews at www.cruisecritic.com . As an example, I'm booked in a cabin for a January cruise on Holland America's Volendam that has a window and an adjacent balcony that is semi-private. (The balcony is open to everyone, but no one uses it except those whose cabins are next to the balcony.) But Holland America sells the cabin as a low-cost "inside" cabin. CruiseCritic buffs rave quietly about the cabin.
My daughter just booked a balcony guarantee on Pricess and was upgraded to a much nicer cabin on the Lido deck where she is happy to be. As Dave said, you are guaranteed to get at least the same grade as you booked, but could well be upgraded, higher deck, etc. If you are prone to seasickness you want a cabin midship with a lower deck. If this is not an issue, try the guarantee. Cruise Critic is a wonderful site to learn all you ever wanted to know about cruising.
I just booked an inside guarantee, but not for the lowest (cheapest) category. I chose an category that guarantees me a decent deck level and a slightly larger than base-line cabin. Before doing so, I looked at which cabins were still available in that category to make sure that any one of them would do. I'm not expecting an upgrade, but hey, it be gravy if they did.