Bandits are other players that generally have (but not always) advanced gear and a tendency to backstab other players, mostly newly spawned players. Players powerful enough to be considered bandits usually have chainmail and/or iron armor and as such have probably gone north and back. They usually don't travel alone, and can be quite tough to fight off. They show up often in places with food and healing potions, such as Romero, Portsmouth, and Grimdale. Sometimes players that act friendly at first (acquiring the Healer tag as a ruse is common) can be revealed as bandits, so be wary.
Bandits will usually group up and go north for good gear first, then returning south to get essentials such as healing potions and food. They will also slay other players if confident enough to try and get good equipment.
Also note that players can be considered bandits without attacking anyone if they are powerful enough. It is still probably not worth the risk, especially if they are with allies.
Fending them offEdit
The easiest way to avoid a bandit attack, of course, is to remain unseen. Sneaking in the presence of bandits can render you almost unseen, so long as they are not initially aware of your presence and that you do not render yourself visible or go too close to them in proximity. If spotted by bandits, it is best to try and flee, as they will almost certainly kill you if they are strong enough.