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Raids (a type of group) are parties of 6 to 40 people, divided into 2 to 8 groups of up to 5 players. The terms "raid" and "raiding" primarily and traditionally refer to PVE raid-specific instances and zones. As party leader, a player can convert their group into a raid group by accessing the "Social" Panel, selecting "Raid", and choosing "Convert Group to Raid." From then on, any new players invited to the group will join the raid group (up to a maximum of 40).
While in a raid group, players do not receive credit for completing quest objectives unless the quest calls for a raid. Players also receive an experience reduction for any mob killed while in a raid group. These are to prevent players from creating very large groups in order to complete normal quests or other game content intended for parties of 5 or fewer. This experience reduction is simply that the usual "group XP bonus" is not applied while in a raid group.
In World of Warcraft: Wrath of the Lich King, all 25-player raids are also available to complete with 10 players. This is so that more players will get to see end game content. (Even the Lich King encounter will be available as a 10 player raid.)
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 Battle Shout (note that this is no longer needed in current patch). The leader can promote other characters, which gives them the abilities to invite and kick from the raid and also use the broadcast raid warnings (using the "/rw" command).
