Liebniz tried to prove his theory of monadolgy by first stating that there are composite substances such as animals, therefore there must be something that makes up these composite substance, which would be simple substances. These simple substances, however, cannot be broken down any further and are indivisible. Since bodies are divisible things, then these simple substances, which he calls monads must be mind-like entities. .
They are not physical objects we seem to see and touch. These substances are mind-like and therefore cannot be seen and/or touched. The physical objects we see and touch, however, are only perceptions of these simple substances. The same goes with his thoughts on the physical world we seem to see. Everything is a perception of these mind-like entities called monads.
Monads do not interact casually. When it appears that they are interacting, they are not. As stated earlier, everything is a perception. So when it seems that these monads are interacting with each other, they are only a perception, and they do not know that the other monads exist. Liebniz believes that God programs these entities, so he programs to appear to be interacting with each other, when in fact they are not interacting at all.
Liebniz believes that these "monads" are mind-like. He proves this by saying that they must be either bodies, minds or both together. He then disproves that they could be bodies because bodies can be divided and are therefore composite substances, whereas it was already proven that these monads must be simple substances. So, these monads must be mind-like as it is the only possible choice left.
Liebniz believes that they alone deserve to be called "individual substances" because God programs all these monads internally, and they never really interact with each other, it's only perceptions of interaction. No monads really know that other monads exist; they are only perceptions of things preprogrammed by God.