Tier is actually the rank of items you gather in the world or the items you craft with these materials. An item’s power is increased with its tier. For example a pine tree gives you tier 4 materials. The bow you craft with pine wood will become a tier 4.0 bow. The reason I used 4.0 but not 4 as an example is to introduce you to the sub-tier system.
Some materials can also become uncommon, rare, exceptional,legendary or mythical. For example a whitewood tree can spawn in the world as an exceptional one and the wood I gather from this tree will be tier 8.3. This is called the sub-tier.For example an exceptional whitewood bow will be a tier 8.3 bow.
There are 8 tiers and 5 sub-tiers. Also there is another layer of tier while crafting materials which is called quality.
Tier .1=Uncommon (green glow around the resource)
Tier .2=Rare (blue glow around the resource)
Tier .3=Exceptional (purple glow around the resource)
Tier .4=Legendary (red glow around the resource)
Tier .5=Mythical (orange glow around the resource)