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A unit frame is a screen UI element that usually represents a "unit" (player character, mob, or NPC). It can include a name, portrait, status bar or some other element related to the unit. Unit frames are often displayed in a row across the top of the screen or in a vertical list window that may or may not have a box around the defined list of unit frames.
AddOns that manipulate unit frames are very common and are usually used to change how state and statistics for party or raid members are displayed.