Most items that require a drop of only a single item, such as the retrieval of a specific item, or the removal of a head from a named mob, each player in the group that loots the mob can each loot one of the items.
Quest items that require you to collect a certain number of items can only be looted by one player at a time.
The former can be looted by any questholders regardless of loot priority (such as Group Loot or Free For All), the latter are looted as normal. If only one person has the quest to collect a number of items, they may loot from each mob that drops a quest item, regardless of loot priority. They will also be able to loot any money, and start any loot threshold rolling on items whose quality is at or above the loot threshold.
There are still other quest items that drop regardless of having the quest or not. Some of these have alternate uses, others are used only for the quest they are attached to. Often they are not soulbound items, and can be traded, sold or bought by and from players.
The final Quest Drop is the drop of an item that starts a quest. Each player in the group can loot the item, regardless of loot priority. The quest item may still have a level requirement, and some quest items of this nature can be used in other ways (e.g., Ghosthowl's Pelt may be used as a cloak).
A world drop is a (usually bind on equip) item that has a very low chance to drop from mobs, chests, or other sources within a certain level range. Some will only drop from specific types of creatures. World drops are largely impossible to farm for because none of their sources have more than a miniscule chance of dropping them. Because of their rarity, many world drops fetch high prices on the auction house—especially those with desirable appearances.
Some world drops have been affected by the various changes to zones' levels over the years. For example, s drop from level 40+ oozes and worms in old world zones; but as of patch 9.0.1, mobs in these areas only scale up to level 30 unless you're on the relevant Timewalking Campaign.
This isn't a very widely used term, but some uncommon or better random drops are actually restricted by continent.
For example, items from the Bristlebark collection (, , etc.) can drop from any mob within a certain level range in Kalimdor. On the other hand, Silver-thread collection items (like ) only drop in the Eastern Kingdoms.
Zone drops are like partial world drops. They have a very low chance to drop from mobs within a specific zone, instance, or area. Like world drops, some of them drop from certain types of creatures—such as the , which can drop from any dredbat in Revendreth.
A drop that only comes from a specific mob or group of mobs.
A drop of a legendary quality orange item inside or outside an instance. Most drop from the highest level raid instance bosses and then only occasionally. In the Broken Isles, legendary items drop from dungeons, raids, and world bosses.