"Blessed is the man who does not walk in the counsel of the wicked or stand in the way of sinners or sit in the seat of mockers." NIV translation
Do you want to be happy in life? That is what this verse is talking about when it speaks of the one that is blessed. The number three is a biblical symbol of divine perfection and here we see a contrast between that perfection and the fallen man. We are called to walk as Jesus did (that is what it means to be a disciple) and the verse starts off with the man walking. We see, that the man keeps on walking on the path of Jesus when he does not listen to those that leave God out of everything (the ungodly). But, when the man listens to them, he stops walking in Jesus' footsteps and stands in the way of sinners. This is where the man does the same things that the sinners do. We must note that we all are sinners but this is speaking about those that are unrepentant sinners. They are living in sin and are content with it. After a time of joining in that sin, the man no longer stands for Jesus at all but instead keeps company with those who don't even believe that God exists.
"But his delight is in the law of the Lord, and on his law he meditates day and night." NIV translation
The happy man avoids the things of verse one and instead finds joy in the Word of God. Do you have a hunger for the Word of God and a joy in learning more and more about Him? The happy man not only studies the words but puts them into practice in his life as he allows the Word and the Spirit to mold and shape him into being like Jesus.
"He is like a tree planted by streams of water, which yields its fruit in season and whose leaf does not wither. Whatever he does prospers." NIV translation
The blessed man stays connected to the Word of God which is described as the streams of water. Throughout the Bible, the Word is described as the Living Water. (see John 4) A tree that is given plenty of water produces fruit and it is the same with a disciple of Jesus Christ. The follower of Jesus will also bear fruit over time and will continue to produce fruit as long as they are here. (In Matthew 21:18 & 19, you can see what Jesus thinks of a tree that does not produce fruit.)
"Not so the wicked! They are like chaff that the wind blows away." NIV translation
We see a contrast between the man of God and the ungodly as the man of God is described as a tree which has roots and is anchored but the ungodly is like chaff that is blown about on the breezes. In these days, the grain was taken to the threshing floor at the time of harvest. At the threshing floor the grain was separated from the rest of the plant by tossing it into the air. The wind would blow the husks away and the grain would fall to the floor where it could be gathered.
"Therefore the wicked will not stand in the judgment, nor sinners in the assembly of the righteous." NIV translation
Those that leave God out of their lives (the wicked) and hope for the best will not have eternal life. Likewise, those that do not repent and ask Jesus for forgiveness (the sinners) will not be with God forever but will be cast into darkness. The mockers (atheists) who do not even believe that God exists will likewise suffer the judgment. (see Revelation 20)
"For the Lord watches over the way of the righteous, but the way of the wicked will perish." NIV translation
The fruit is what is important and the chaff is burned up. The righteous follow the ways of God and His ways will endure for eternity. The wicked follow their own ways and they will cease and be burned up in the final harvest just as the chaff is separated from the grain.