Perfect World is the name the Agent Smith gives to the first simulated world created by the machines. It is described as perfect, there was no violence, no suffering, no hate. According to his description, more or less like this:
"...Entire crops were lost... Some said that we lacked the programming language to describe your perfect world, but... the point is that humans define their reality through suffering..."
Then scholars conclude that the world did not convince humanity, but they cannot agree on the reasons for that. Maybe it was not so real or people needed real things like suffering to compare to good feelings.
We currently not know if in the future the world will be like that, after the End of the War, prophetized by many oracles.
Note: this article was written time before The End of the War thanks to Neo