What is state in a sequential circuit?
The state of a general sequential circuit is no different to the state of the flip flop in your specific example (a flip flop is simply a state machine with two possible states). It shows the state the circuit is currently in.

The outputs of the various gates and circuits that feed the flip-flops determine the next state the machine will occupy, but until the transition actually takes place they are just provisional and may change at any time according to changes in inputs or other factors driving state changes.