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Sovereignty is a social policy in Civilization V. It is part of the Rationalism tree and requires Secularism.
The next step in establishing a contemporary, rational society, after the development of Secularism, is to recognize that the power a sovereign possesses comes from the people he governs, rather than from some nebulous ideal, order, or deity. This concept tends to improve the country's economy first, by allowing scientific buildings to contribute to economical development as well. Second, it is the necessary step to trigger the explosive development of modern science known as the "scientific revolution."
Game Info
Strategy
This mid-level Policy goes a bit off-topic, and develops your 
Gold Gold production based on scientific buildings you have. It's a nice way to upgrade all these boring schools and universities, and it combines well with the secondary effect of Free Thought, which focuses on a purely economic improvement. Note, however, that this Policy doesn't increase 
Science Science in any way (unless you count the added incentive to construct science buildings). As far as scientific progression goes, it is just a stepping stone towards the level 3 Policy of the tree.
Civilopedia entry
Sovereignty, short for "popular sovereignty," is the belief that the state belongs to the people, and that the rulers are "servants" to the people. Power derives from the people, and those who rule do so with the people's consent. Popular sovereignty can be most easily contrasted with a theocracy, in which the ruler derives his power from God, not from the people. Nations with popular sovereignty usually have some form of periodic elections in which the people can express their will, hopefully voting for the best candidate, rather than say the tallest or the best liar.