Threat is an important part of combat and it can refer to two things. First, all hostile NPCs have a "threat radius". If you enter this radius they will engage you in combat. An NPC's threat radius is determined by their level and your level. A level five NPC will have a small threat radius against a level twenty-five player compared to a level six player.
Once in combat you will accumulate a certain level of threat against an NPC. The more powerful spells you use, the more threat you will gain which will make the NPC more likely to attack you. This is especially important to remember when fighting NPCs in a party. Certain party members called "tanks" will want to make sure that they generate the most threat, while other party members will want to generate the least threat so they can deal damage and heal without being attacked.
If you have the highest threat against an NPC and your threat level drops below another party member's, the NPC will then go and attack the player with the next highest level of threat. This could result in your party losing the battle against the NPC and dying. To make sure you hold threat as a tank, know your skills and abilities and always be aware of what your party members are doing. Remember, even helpful spells such as healing fellow party members can generate a large amount of threat.