Kevin Flynn (Jeff Bridges reprising his role) was once a skillful game and program designer who became the CEO of his company at the end of TRON. He created the program Clu (also played by Bridges with the help of some remarkable digital effects that reversed his age by about 25 years) to help him create the “perfect system” without any flaws. If you’re as confused as I am as to what exactly this “perfect system” was designed for, don’t worry – it’s just one in a series of inexplicable plot holes in this middling entertainment.
Correction: I originally misidentified the Jeff Bridges character as Billy. I have corrected it to Kevin.