The pre-roll video will play anytime someone goes to the player on your stream, whether the stream is online or offline. It plays right when someone logs on, then it will "join" the live stream. The pre-roll will play every time someone goes to the player, so if they log out, then log back in, the video will play for them again.
You can set up the pre-roll video on your stream by uploading a video into your Media section. After that, go to your Live Monitor page, and hit the Edit button in the top right corner. Pre-Roll Media option is at the bottom of the About tab.
Note: Features such as offline pictures and videos, and pre roll videos only will work if you are using Stream Monkey's player. Anywhere you are sending the m3u8 link (apps, set top box channels), it will not show up.