Peel, or Peeling, is when a person generates more threat than the Tanking character and the target switches his focus from the Tank to the person that is peeling.
A Knight of the Blazing Sun is tanking a huge bear. His group member, an Empire Witch Hunter, comes in almost immediately after the Knight gets one or two swings off. Let's just say the Knight happens to use his most threatening attack to keep the bear focused on him, but it misses! If the Witch Hunter keeps hacking and slashing the bear, the bear will suddenly see the Witch Hunter as more of a threat than the Knight. The bear will then lash out at the Witch Hunter that peeled off the Knight Tank and try to rip him to pieces. At that point, the Witch Hunter can just hope the Knight Tank re-establishes his aggro and peel it off the Witch Hunter, run around in circles yelling 'Get it off me!,' or swing at it until he dies.