The Absolute Terror Field is a theme in what could be called the three modes of action in Neon Genesis Evangelion: the psychological, the metaphysical and the scientific. That the AT Field works in all of these spheres is not revealed until the final episodes of the series, and the fact that it is being used in such an expanded role may be missed by people distracted by classical music and explosions.
For the first 23 episodes of the series, the AT Field is mostly given as an excuse as to why the Evangelion units are needed at all, since the angel can only be destroyed by an Eva cutting through its AT Field. That the Absolute Terror is related to either the emotional difficulties of the characters or in what is hidden underneath Central Dogma is not revealed, although perhaps it is hinted at.
The first time the AT Field is mentioned as something to do specifically with humanity or with the human condition is when in Episode 24, Nagisu Kaoru reveals that the AT Field is "the light of the soul, sacred territory where no one should intrude" and that "everybody has an AT field". Over Episodes 25, 26 and the redone '25 and '26, a great deal of information is revealed about the AT Field, although again it is concealed amongst a great deal of explosions and classical music.
In short, the AT Field is the physical force that keeps a human physical together. Without it, they dissolve back into LCL, or amniotic fluid. This comes at a price: keeping together as a coherent biological individual with an ego border means that it is necessary to shut others off from your mind. And it makes the person incomplete, leaving a hole in their mind that must be filled. Which leads to the metaphysical (or perhaps simply magical) nature of the AT Field, the heritage of incompleteness that people have due to some catastrophic event in the past. The AT Field can only be broken, killing the body and freeing the mind, by using a arcane ritual involving all sorts of religious symbolism.
The consensus is that NGE grew in the telling, so that what was at the beginning of the series only a piece of jargon to be thrown around during battles with gigantic D8 shaped monsters became a complicated explanation of what makes human nature what it is. Again, Hideaki Anno is a very smart man.
The concept of the Absolute Terror Field is also not new to Western Magic, although they were a little confused about its exact form and function.