Loot, used as a noun, refers to stolen items. It can also be used as a verb, "to loot", which is a synonym of stealing. In role-playing games, players often use the word to refer to items taken (or "looted") from dungeons and killed enemies.
Loot can be a means for a GM to subtly adjust the balance or tactics of a party -- a player character lagging behind in power may "happen" to find a superior piece of equipment. The GM may also choose to be less subtle by, for example, arranging for the strapping barbarian to get a cursed Girdle of Gender Change disguised as a Belt of Increased Strength.
The taking of loot off dead enemies was a common practice in medieval warfare. If you were far from home, weapons, armor and clothes taken off dead enemies were often the best place to get replacements, as well as goods which could be sold for some coins. Indeed some civilizations went to war mainly to steal everything they could fit in the longboat.