Threat is the method the game uses to determine which player or pet in a party or raid gets targetted by a particular enemy. An enemy will target and attack whomever has generated the most Threat towards that enemy.
Each enemy has its own threat which is tracked separately, so each enemy can attack a different target depending on the status of their own threat meters. Aside from movement, almost every action in combat builds up threat against particular monsters (including attacking, healing, and casting buffs or debuffs).
Live Update #51 added Threat Meters to the game (opened or closed with CTRL + T); under enemies' health and power bars there is now a threat bar showing how much threat you have generated on that target (as a range between 0% and 100%). If you are the enemy's current target, the Threat Window will also show the percentage threat of the second-highest person on the list. Threat values are also in the Combat Log, making tracking threat easier. Prior to this update, threat was tracked internally and was not visible to players other than the examination windows of taunts/detaunts.
Threat control is the basic method a group uses to control monsters or crowds of monsters, and is one of the large advantages of being in a group (as opposed to be being alone). Managing threat in a group is a strong tactic, as monsters that attack people with strong mitigation, avoidance and defensive abilities, all aspects of the fight become simpler. Players with healing abilities (mainly priests) will have an easier task as the damage taken will be smaller and a smaller portion of health is lost - there is less of a rush to keep the subject alive. Players with weak defensive abilities, such as mages, will not be taking hits or damage and can concentrate on what they do best, like dealing damage without interruption or danger of dying. Tanks will be contributing the maximum they can by minimizing the damage the monsters are doing to the group. Scouts are good managers of their own threat levels and can help with the management of other group members' threat levels as well. It is important to be aware and communicate to keep monsters under control.
Bob the Guardian, Joe the Swashbuckler and May the Fury are fighting an Orc; the Orc has 500 threat towards Bob, 650 threat towards Joe and 300 threat towards May. Joe is therefore probably the target of the Orc's attacks, but it would be better to have Bob (who as a Guardian has good defense and plate armor) taking the hits (and it would be bad if May had to take hits, as she might have the least armor and avoidance as a Fury, and may have spells interrupted by damage). Joe uses a "decrease one threat position" ability. It is likely that Joe's threat is now less than 500, and that Bob is now the Orc's target, or at least is much closer to taking its hate.
Taunt-Type abilities increase threat or threat position , while abilities that decrease threat or threat position are often called detaunts, hate droppers, or aggro drops. There are also buff abilities that automatically move a certain amount of threat generated by a subject to another subject; these are often known as hate transfers. Attempting to reduce a friendly NPC's threat will raise it and start combat instead.
Sometimes an ability or monster ability will clear all or most of the current threat tracked by an enemy; players should carefuly watch their hate after one of these abilities occurs, or risk dying and/or causing confusion.
In PvP (player versus player) combat, threat is not tracked, however some threat-decreasing abilities cause the enemy to lose their target on you (detaunts) and threat-increasers force them to target you for a length of time (taunts).