Heroes are a type of boss NPC. They are many times more powerful than a normal NPC of equal rank with far higher stats. They are found in Lairs, hidden away areas, keeps, towns and cities. Quite often they will drop a weapon or armor set piece.
Heroes are usually meant to be killed by a balanced party around the same level as the Hero itself. If the Hero has skulls lining its portrait, than it requires an extra party (within a warparty) for every skull.