Pro-rated annual leaves means that you are entitled to a certain amount of annual leaves based on your duration with the company. Let's say you are entitled 14 days annually and you join on 1st Oct, so for year 2010, the AL you get is 3.5 days. (31+30+31)/365*14=3.5

You entitle only 3.5 days of AL but have taken 4 days in total, the 0.5 day will be considered as no-pay leave and deduct from your salary. It's pretty standard across all companies.

Of course some strict ones only allow you to take leave based on the no. of AL you have earned. You want to take 5 days but up till now you manage to save only 3 days. Since your company doesn't allow you to take advance leave, what to do? Work for another 2 months and save another 2 AL.