Hit points (abbreviated as HP) are the basic life force of a player or mob. Once they go below zero, the player or mob dies.
In order from highest to lowest HP:-
Sometimes players, usually tanks, choose to wear equipment that gives them HP at the expense of other stats like armor. This is based on the belief that taking more damage during a fight will cause it to reward you with more experience.
Mobs generally have more HP than players of comparable levels. Code has been put in to allow mobs that have a million HP but this is more for the builder's amusement then anything else.