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A group is a collection of player characters who have banded together to complete a common goal. Forming a group enables players to chat privately among themselves, share XP, collectively complete quest objectives and achievements, manage the distribution of loot from mobs, among other things. In World of Warcraft there are two types of groups:

A group consisting of at least 2 and up to 5 players. Party is the default type of group and is used primarily for completing 5-man dungeons and group quests, or to band together for any simple purpose.
A group consisting of at least 2 and up to 40 players. Raids must be created out of a party and are used primarily for completing raid instances or participating in world or battleground PvP.