In RPGs, an encounter can mean two things: A note in adventure's design saying what creatures the adventurers will find on the area, or, during the game, what happens when people encounter the said creatures. The latter kind usually directly leads to combat, but not always.
The former are an adventure design issue. Some game systems don't say much about design of encounters (one system I said begged the GM to Use Common Sense above all). You simply put creatures or people on the areas, or say what monsters are walking around the place. Some systems, such as D&D 3rd edition, have mechanisms that help to make balanced encounters.
The latter are, again, handled differently in different games. Some have specific checklists on what happens when players meet the monsters; some need no other guide but the combat rules to resolve the situation.
In Neverwinter Nights, an Encounter is a trigger-like thing. In the toolset you can paint a polygonal area and say what monsters can be found on this area - the game has some creature presets that make it easy to just pick a difficulty class and paint them on the area. After you have the area and creatures down, just choose the spawn points and say what kind of encounter this is - repeatedly firing, or single-shot - and whether or not the encounter is active at the moment. Now, when the player(s) waltz in the area AND when the encounter is active, a bunch of monsters will appear on the spawn point(s). (Typically, the spawn points should be designed so that the creatures appear as far as possible from the players. The game seems to do this on default.)
Encounters are far more interesting than plopping individual creatures on specific areas because they get balanced depending on the average level of the party, henchpersons, familiars and other summoned creatures. Encounters are also pretty cool for DM: You can just say "Give me a nice and easy gnoll encounter right here" in the toolset instead of creating individual gnolls. During the creation of the module the DM can also make custom encounters and they appear in the DM Creator - you can just select the encounter and *fwoomp* fire away some gnolls. Also, for module debugger, encounters are interesting because to debug the module you can remove encounters far easier than limboing multiple creatures. All in all, encounters rule.