The Hiding skill allows a player to “cloak” their selves. The circumstance can vary, from fighting players, monsters, or even to hide yourself while gathering resources.
Performing some actions while hidden such as casting spells, or moving, will reveal the person hiding. Others, such as mining, or healing, will not reveal the player.
At 80% Hiding, you may begin to use the Stealth skill, which allows a player to walk while hidden, until they are attacked, revealed, or perform an action which causes them to reveal their selves.

Please note, you must be in Peace mode to be able to hide.