I have never judged that something could not be made by God except on the grounds that there would be a contradiction in my perceiving it distinctly [that is, in my conceiving of a situation in which it is true].
In other words Descartes is asserting that all things that one can conceive of without contradiction are possible.
Descartes develops this assertion later in the Meditation:
I know that everything which I clearly and distinctly understand is capable of being created by God so as to correspond exactly with my understanding of it. Hence, the fact that I can clearly and distinctly understand one thing apart from another is enough to make me certain that the two things are distinct, since they are capable of being separated, at least by God… It is true that I may have…a body that is very closely joined to me. But nevertheless, on the one hand I have a clear and distinct idea of myself, in so far as I am simply a thinking, non-extended thing; and on the other hand, I have a distinct idea of body, in so far as this is simply an extended, non-thinking thing. And accordingly, it is certain that I am really distinct from my body, and can exist without it.
The thing to keep in mind is to “conceive of” anything does not necessitate that one believe. To “conceive of” anything means one can coherently think about that situation. Thus, one can conceive of a situation where donkeys fly or that the IRS would cease to over tax, but one can’t conceive of a situation where 1+1=10.
The argument can be formulated this way: