Xfire group chat allows you to talk to several of your friends at the same time in the same conversation. It makes things easier to coordinate a gaming session, hang out with a group of friends, or (because chat rooms are persistent-state) have a common meeting place on Xfire.
To start a group chat, right click on a friend's name and select "Invite to New Chat Room". You can also find this same menu under the Tools -> Friends menu in the Xfire client. Or, you can convert any 1:1 chat with a friend to a group chat by selecting Actions -> Invite more people from the 1:1 chat window.