It stands for "My". With a possessive structure like this, with a pronoun, the pronoun stays in its nominative form, only the possessed gets a suffix.
My horse - az én lovam
Your horse - a te lovad
His/her horse - az ő lova
Our horse - a mi lovunk
Your horse - a ti lovatok
Their horse - az ő lovuk - yes, "ő", not "ők", even the plural "-k" is omitted from the pronoun.
The root was lov-.
In the nominative, where there is no final vowel, lov was considered not pronounceable, and so the -v disappeared while lengthening the vowel and you have ló.
In other cases, where the -v is not at the end of the word, it was kept.
Similarly with kő "stone" (accusative követ; compare Finnish kivi "stone").