What it means, first of all, is that the state is neutral on the good; it favors, as little as possible, no particular set of ideals about what is good over another: neither religious nor secular ideals, consumptionsit or perfectionalist ideals, etc. In terms of practical realization, this means that a liberal state has a government elected by universal suffrage in competitive elections, and offers extensive guarantees of civil and political liberties under the rule of the law. The RoL is a matter of the laws beinf fairly predictable, reasonably equally applied, and determined in a tolerably democratic way.
Liberalism so understood is compatible with socialism, understood as democratic control over the basic economic decisions of life. It does not favor markets or planning. On that issue it is neutral. It is not compatible with Marx's communism envisaged as a stateless society without law. But then I think that would be a very bad thing.
jks
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