The faction discount is a percentage discount when buying items based on reputation with the faction of a vendor.
As of Patch 2.3, all vendors with an associated faction now give discounts at all levels above Neutral.
This includes the riding skill below expert and mounts.[citation needed]
In 3.2 the faction discount has been expanded to apply to flying mounts, through Thrallmar/Honor Hold reputations.
As of World of Warcraft: Cataclysm, goblins always receive the best available discount, regardless of reputation. This means that you get a 20% discount even when at neutral reputation with a faction, despite normally only being applied at exalted reputation.