Headshot is a passive alternative ability that rangers level 60 + can purchase assuming you already have the AA archery Mastery rank 1. It provides the opportunity to kill lower level humanoid** mobs by using an arrow that does from approximately 32,000 damage at rank 1 to 140,000 worth of physical damage (possibly more with hunter's fury, called shots, discs and various AA's) at the maximum AA rank of 19, therefore killing most mobs instantly. (The physical damage of headshot increases by each rank). Headshot cannot be resisted or mitigated. At level 60 with headshot rank 1 you can headshot level 46 humanoid mobs. Each additional headshot rank that you purchase allows you to use headshot mobs two levels higher up, all the way up to mob level 82.
Note that from Feb 2011 some major changes have been made. You can now get the headshot AA at level 60, whereas previously it was level 62. Therefore the maximum humanoid mob that you can kill at rank 1 is now 46 instead of 48. Because of this you may now need to purchase the next rank up to headshot mobs that you used to be able to before the changes took place. There are now 19 ranks of headshot and it now only affects your current single target.
So how do you use headshot? There are various ways. At lower levels if you are confident at snare kiting, grab a few mobs, snare them and shoot using /autofire. Alternatively you can root and shoot mobs but this isn't as effective. Once you get the area effect root/snare spell vinelash cascade at 73, use that spell instead of snare. Initially it roots the mobs for a short duration. Once root breaks, the mobs are snared for a time. Keep casting vinelash cascade until you have headshot them all. As you are using snare or root, I would avoid targetting mobs that summon or resist changes to their run speed, unless you like a huge challenge! If you also have the spell Hail of Arrows (or the higher level versions), then you can use this as well, however as from Feb 2011 headshot will only affect the single mob you have targetted, so be aware.