Peeling is generally used to refer to one player intercepting and gaining aggro from a given mob (in essence, "peeling" the mob off that player) who is attacking one of the more squishy members of the group.

This role or action is most commonly filled by a Hunter in the raid environment where peeling mobs off an initial aggro target to a tank is a common step in the pulling of many boss encounters that have multiple mobs involved. A boss where you might see a peel implemented is Majordomo Executus.