A feature is a general term that describes an attribute of something. Second Life's features are, basically, everything it can do. Specifically, every prim/object has a "Features" tab (as of SL version 1.9.1) in the edit window that is used to configure flexible and light options. A feature can also be something new that was not in a previous version, such as flexible prims were a new feature in (or a feature of) version 1.10.