Tier 0 = 5-10 man raids (ubrs/lbrs/strat/scholo)
Tier .5 = Quested Upgrade from the Tier 0 set, requires some instance runs.
Tier 1 = (40 man) Gear from MC, All bosses will drop 2 set pieces except for Rag who will drop Tier 2 pants.
Tier 2 = (40 man) Gear from BWL + Rag(MC) and Onyxia
Tier 2.5 = (40 man)Gear from AQ40
Tier 3 = (40 man) Gear from Naxx
Anything higher is going to be in the expansion and is not finalized yet.
In general you need a bunch of items from the previous tier in order to go for the next Tier. in otherwords the Tier 1 gear prepares you to be able to go after the Tier 2 gear, etc.
The higher the number, in geenral, the better the gear. Anything past Tier .5 will pretty much mean you need to be in an end-game raiding guild.
Edited, Dec 8th 2006 10:39am by TseTsuo