Tiers are fan made tiers. By tier I guess you could call them categories for Pokemon.
They are used for competitive battling to split each Pokemon up based on how they fair in each tier. The higher tiers consist of powerful legendary Pokemon or Pokemon with abilities that make them just to good for Ou. Ou is the second highest tier standing for Overused and is basically all your Ubers rejects like Thundurus-T and then allot of standard Pokemon that are to good for Uu or just have abilities that could possibly make them overpowered in lower tiers.
The whole concept of tiers are so you don't face a full team of Legendary Pokemon every match when your using your Magikarp. You battle and build your teams around the Pokemon in the tier but you can use Pokemon below the tier in your team. The most used tiers are Smogons who are a major Pokemon community possibly with 20x the amount of members this site has. With their many members they put together tiers based on the Pokemons typings, abilities, threats, movepool and stats. Typing is a big deal it is what keeps some Pokemon like Charizard in Nu because when switching Stealth Rocks takes away 50% of its health.
Here are smogons tiers enjoy