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Raids are parties of 6-40 people divided into up to 8 groups of up to 5 players. These are primarily used for large-scale PvP combat, or for raid-specific instances and zones. If you're the party leader, you can convert your group into a raid group by accessing your 'Social' Panel, selecting 'Raid' and choosing 'Convert Group to Raid'. From then on, anyone you invite will join your raid group.

Keep in mind that raid groups do not receive quest rewards unless the quest calls for a raid. This is to prevent people from creating very large groups in order to do normal quests that do not need raid groups to complete. You also receive an experience reduction for any killing you do in a raid group. Again, this is to prevent people for using raid groups in situations where normal groups should be sufficient. This experience reduction is simply that you do not get the usual "group XP bonus" that you get when sharing XP in a Party group.

Info on the official WoW site
See also

Raid Instances

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Most instances can be entered by a raid, meaning that all members of the raid are placed in the same instance, but every instance has a different "maximum raid size". Some instances, however, are designed to be entered only by raid-sized groups. Upper Blackrock Spire, while part of the same instance as Lower Blackrock Spire, is designed for 10-man groups.

Azeroth Raids

10-man:

20-man:

25 man:

40-man:

Outland Raids

25-man:

Future Release Raids

Starting a Raid

The leader of a party can convert the group to a raid by clicking the "Convert to Raid" button in the Group window. At this point it becomes a "group of parties" with up to 8 parties, each with 5 characters. The leader of the raid can drag characters between groups to move them to different parties; typically, this is done to achieve some strategic goal such as distributing shamans and paladins to share totems and auras or warriors with rogues for battleshout. The leader can promote other characters, which gives them the abilities to invite and kick from the raid and also use the broadcasted raid warnings (using the "/rw" command).

Raid Mods

See: Raid Addons.

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