In a social network, a user group is a group of users who have the same pre-defined privilege. When using a feature on a phpFox community, it is usually tied into a user group, which in return gives you the control over what each user group can do. As an administrator, you can control lots of user groups' permissions from uploading an image or writing a blog to viewing a secret group.
You can create as many custom user groups as you want where each user group has over 330 customizable settings, which control things like allowing a user to write a blog to the ability to add comments.