What does "this" refers to in the code below?

I was looking at some tutorial, there I found a piece of code where I stuck.Please help me to understand this code.I have marked the questions in my comments.

Code

UserSchema.pre('save', function(next){    //this is a pre hook which is used.understood.

    var user = this; // what is the function of this?
    var SALT_FACTOR = 5;

    if(!user.isModified('password')){  //not understood.From where this function arises?I did not found this anywhere in mongoose tutorial/api.
        return next();
    } 

    bcrypt.genSalt(SALT_FACTOR, function(err, salt){

        if(err){
            return next(err);
        }

via Aditya Jain