The color gray is used in World of Warcraft in various different ways. One way is as part of the usual 
[Blizzard] color system for items (gray, white, green, blue, purple, orange, red) or mobs (gray, green, yellow, orange, red).
Gray Items
Gray items are often referred to as Vendor Trash. These are items that generally have no good use compared to other items you could get that are of higher quality.
Gray items, despite their uselessness, can sometimes sell for a good amount to a vendor.
Some gray items have also recently been given uses at the Darkmoon Faire for ticket turn-ins.
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Gray Mobs
Gray mobs are of a level much lower than yours. These mobs do not give experience. Once a mob is grey to you, it is normally quite easy to kill. There are some exceptions though.
Warlocks can not gain Soul Shards from Gray mobs.
Also, if, when the mob in question is targeted, and the plate at the top of the screen indicates its name with a yellow name on a gray background, it might be said to be gray. This means that someone else will be credited when that mob is killed.
Gray Names
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