Here is a brief explanation from in.gov (http://www.in.gov/history/2478.htm): "With the cession of the state lands assured, Congress proceeded to administer the new national domain. An ordinance was adopted on May 20, 1785, which laid the foundations of American land policy until the passage of the Homestead Act in 1862. After the Indian title had been purchased the ceded lands were to be systematically surveyed, prior to sale or settlement, into townships six miles square. Of the thirty-six sections of 640 acres in each township, the sixteenth was reserved "for the maintenance of public schools." Here is the actual language, in the two sentences mentioning public schools, from the Land Ordinance Act of 1785: "There shall be reserved for the United States out of every township, the four lots, being numbered 8, 11, 26, 29, and out of every fractional part of a township, so many lots of the same numbers as shall be found thereon, for future sale. There shall be reserved the lot N 16, of every township, for the maintenance of public schools, within the said township; also one third part of all gold, silver, lead and copper mines, to be sold, or otherwise disposed of as Congress shall hereafter direct."
Source: U.S. Congress. House. Land Ordinance of 1795. 2nd Cong. (May 20, 1785). Web. http://www.ambrosevideo.com/resources/documents/104.pdf [verified 4/18/14]