If you have the DoD expansion, shrouding is one of the feature offered.
To shroud means that you take on the characteristics of the selected mob. All of your gear, skills and abilities are not used, you take on everything that has been predetermined for that shroud. You can select different monster shrouds (goblin, ord, animal, elemental, etc.). You can also select different levels of shrouds.
For example, my level 70 cleric will sometimes shroud as a level 5 rogue goblin. I will get temp and run around farming spiderling silk. I lose all of my cleric abilities, but gain all of the predetermined rogue abilities.
For the most part, shrouds have limited uses:
--can shroud as a rogue of appropriate level to pick locks in dungeons.
--can shroud up or down to group with friends of different levels. Note, higher level shrouds are grossly under-powered compared to their player classes.
--if you have a pet and you shroud, your pet is suspended. You can then log in the shroud and you can save your pet (it wil be there when you unshroud).
--limited uses for farming tradeskill components.